Seakom Ltd & Anor v Knowledgepool Group Ltd

This is a trial on liability in a claim by the First Claimant, Seakom Limited (“SL”), and the Second Claimant, Seakom International Limited (“SIL”), (together “Seakom”), against Knowledgepool Group Limited (“KGL”).

The claim arises out of contracts between the parties in respect of a website originally developed by SL and known as www.coursemonster.co.uk (“the website”) (“Coursemonster”). Coursemonster was a database and search engine for professional training courses. It remains a successful website as of today, providing access to some 15,000 courses on 600,000 different dates per week. The key benefit is said to be that it allows customers to identify and satisfy their own requirements and check availability themselves. Having identified a course, the customer sends an email enquiry or calls a dedicated telephone line. The sales team then confirms availability, books the customer onto the course, takes payment and sends out joining instructions. The typical profit margin for this type of retail business is said to be in the region of a healthy 30% to 40%.

The first contract under scrutiny was entered into between SL and Business Training Partnership Limited (“BTP”) on 20^th September 2005 (“the BTP contract”). The second was concluded on 17^th December 2008 between SIL and KGL (“the KGL contract”). By this stage SL had transferred its business and assets to SIL, and KGL had bought out BTP. A related dispute arises out of an agreement between SL and BTP in relation to BTP’s own database website at www.thecourselocator.co.uk, known as Courselocator (“Courselocator”).

Following the KGL contract Coursemonster sales dropped significantly, leading SIL to investigate the cause. Seakom say that the result of the investigation was to reveal serious malpractice and breaches of the BTP and KGL contracts by BTP and KGL.

The discovery of these alleged matters was raised with KGL in early 2009. Unsuccessful attempts were made to renegotiate or vary the terms of the KGL contract. Ultimately, however, on 17^th June 2009 KGL served notice of termination with effect from 17^th October 2009.

Seakom allege that they are owed significant commission from KGL under the contracts. KGL denies any liability to SL or SIL on multiple grounds including the following :

SL was established in 2004 by a Mr Kelvin Durcan (“Mr Durcan”) and Mr Mario Moeller (“Mr Moeller”). Mr Durcan had a background in information technology (“IT”) and had set up a training brokerage business which re-sold IT courses to companies and their employees. Mr Moeller was a website developer specialising in search engine optimisation.

As SL, Mr Durcan and Mr Moeller developed Coursemonster, launching the website in September 2004. In February 2008 they decided to part company and to divide SL into two separate businesses, with Mr Moeller operating in Australia and Mr Durcan continuing to operate in the UK. To this end, by written agreement dated 12^th February 2008 (“the Seakom Transfer Agreement”), the business and assets of SL were transferred to SIL, a BVI registered company then and now owned by Mr Durcan.

By clause 3 of the Seakom Transfer Agreement, SL assigned to SIL the “Outstanding Agreements”, defined as agreements which SL had entered into in relation to business prior to the transfer and which remained to be performed wholly or in part. Where assignment was not possible without the consent of the relevant third party, it was agreed that SL and SIL would each use reasonable endeavours to procure the assignment or novation of the “Outstanding Agreement”. Pending assignment or novation SIL would perform the agreement as sub-contractor for SL and SL would hold the benefit of the agreement on trust for SIL.

BTP was established in 1998 by a Mr Kevin Senior (“Mr Senior”) and Mr Craig Hyslop (“Mr Hyslop”). It specialised in brokering training courses to corporate managers, focussing on providing managed services whereby it aimed to provide corporate clients with bespoke training services at a set fee. The ultimate target for BTP was the obtaining of a managed services agreement. The provision of managed services does not necessarily mean the provision of wholly exclusive services. It can mean the provision of managed services on a “preferred” basis (where the provider would be the first port of call), or the provision of managed services limited to a particular division, type of training or geographical area.

Mr Senior and Mr Durcan became acquainted in 2003 and became good friends. They formed the view that a strategic partnership would be of mutual benefit to them – with SL focussing on attracting business opportunities from the web with its technological expertise and BTP applying its sales resources to service these opportunities.

This led to the BTP contract. In outline, BTP would deal with Coursemonster enquiries in return for which it would be paid 60% of the profits of sale for servicing SL’s customers. Marketing expenditure would be divided correspondingly 60%/40%. BTP was to track Coursemonster sales using its internal delegate tracing system and provide customer services to agreed levels.

KGL provides training services. In early 2004 it was bought out of administration by Root Capital LLP, a technology and media investment vehicle of which Mr Simon Philips (“Mr Philips”) was and is a partner and co-owner.

In 2007 Mr Philips approached Mr Senior and Mr Hyslop with a proposal to acquire BTP. In mid-March 2008 KGL purchased the entire share capital of BTP. The BTP sales team dedicated to the BTP agreement moved across to KGL as a result. On 1^st September 2008 the business and assets of BTP were hived up to KGL and BTP ceased all operations. BTP was dissolved on 22^nd November 2011.

The BTP contract was due to expire on 20^th September 2008. On 17^th September 2008 Mr Hyslop (by then at KGL) sent a value proposition summary (“the VPS”) to SIL, setting out the advantages of continuing the relationship. Following negotiations, the KGL contract was executed. Its terms were similar to those of the BTP contract, though the KGL contract was to run for a rolling twelve month period with either party entitled to terminate on four months’ written notice, instead of an initial three year term. A business plan was incorporated.

BTP was founded in 1998 by Mr Senior and Mr Hyslop, with the focus being on the provision of “managed services”. The target was corporate clients, in contrast to a website like Coursemonster which was aimed at individuals searching for their own training requirements. BTP sought clients through “cold-calling”.

In 2002 Ms Claire Smith (“Ms Smith”) joined BTP, largely in an administrative role. In January 2003 BTP recruited two salesman, Mr Oliver Browning (“Mr Browning”) and Mr Steve Allen (“Mr Allen”).

Courselocator was founded in 2003 and aimed at the retail market. In addition to cold-calling in relation to the selling of managed services for BTP, Mr Browning was in charge of dealing with enquiries for Courselocator. In mid-2005 Ms Smith took over that role.

At around the same time as Courselocator was being launched, Mr Durcan saw the opportunity to create and develop, with Mr Moeller, an internet portal for selling training courses. This became Coursemonster.

Mr Durcan discussed his plans with Mr Senior and in due course the BTP contract, drafted by BTP’s lawyers, was executed in September 2005. The proposal was that all Coursemonster leads and enquiries would be channelled exclusively to BTP. The sales function for Coursemonster moved entirely to BTP, which would provide dedicated staff, telephone lines and email addresses to service the leads coming into Coursemonster. In addition, BTP had a customer contact management system using the Microsoft Customer Relationship Management (“CRM”) database which could track the progress of leads. It was agreed that the information coming in via Coursemonster was confidential and belonged to SL. At around this time, SL recruited an IT expert, Mr Tim Bushell (“Mr Bushell”), to continue the development of Coursemonster.

There were three alternative ways in which a customer could be referred to BTP via the Coursemonster website : web form enquiry, direct email enquiry or telephone enquiry. Logs of web form enquiries were automatically generated, and SL could monitor these. But SL had no means of monitoring email or telephone enquiries which came into the BTP team. The BTP sales team would manually input enquiry details into the CRM, with a Coursemonster enquiry being flagged as such. SL did not have contemporaneous access to the CRM, or to the duplicate record created by CRM on a separate system known as “Integrity” and then “Enterprise Study” (“ES”), although it did have audit rights.

SL would receive a monthly report, known as an “OPPs report”, generated by CRM exporting data of all “open”, “lost” and “won” bookings.

BTP was responsible for bookings and invoicing. SL would receive a monthly report of course attendances (“BOS report”) produced by a system known as “Master Financials”. Again, SL did not have access to this system. It raised its invoice for commission by reference to the BOS report.

The BTP sales team dedicated to handling Coursemonster enquiries (“the client services team”) was led by Ms Smith. The client services team was also responsible for Courselocator enquiries and for handling enquires made outside Coursemonster direct to BTP.

It is common ground that an internal practice grew up within BTP whereby any enquiry from a managed services client coming in via Coursemonster or Courselocator would be directed to the relevant managed services client sale team before being logged. It would ultimately be for Mr Hyslop to determine how the matter was logged. Sales team members were remunerated in commission. Where an enquiry was made both through Coursemonster and Courselocator, the enquiry would be logged by reference to the first in time.

From April 2006 onwards Ms Smith was focussing entirely on Coursemonster sales. In November 2006 BTP appointed a new sales person, Ms Angela Chandler (“Ms Chandler”), tasked specifically to follow up repeat Coursemonster leads. She appears not to have been successful and stayed only for a few months.

By 2007 Coursemonster sales had risen sharply, with a consequential rise in SL’s profits.

In mid-2007 BTP’s software licence to operate the Courselocator portal was coming to an end. Mr Senior approached Mr Durcan with a view to SL improving Courselocator’s portal technology by granting a licence of a simplified version of Coursemonster. BTP would continue to own the Courselocator website and the data coming through the website, and would bear the full cost of the website.

A written licence agreement was drawn up, but never executed (“the Courselocator licence”). It contained provision for SL to license the Coursemonster technology in return for 15% of the gross profit from all sales generated through the Courselocator website.

SL duly provided the technology to enhance the Courselocator portal which BTP relaunched in September 2007. SL says that in the course of discussions for the Courselocator licence, Mr Durcan and Mr Senior discussed other ways of maximising the potential of SL’s technology and IT expertise. They realised that the technology could be “repurposed” not only for Courselocator as the basis for “white label” branded portals for specific clients. BTP would be able to offer a portal with excellent functionality as an incentive to clients to enter into managed services contracts. This would reduce the amount of work for BTP sales staff. In return, SL would receive 15% of the profit on each sale. Thus SL contends that it was agreed that sales via customer portals would also attract a commission in its favour.

In September 2007 BTP tendered for a managed services contract with Carphone Warehouse (“CPW”) and promoted the use of a branded CPW portal. In support, SL created the branded portal. BTP was awarded a three month pilot arrangement, which went live on 1^st November 2007.

In the latter stages of 2007, KGL was building up the momentum to acquire BTP. It commissioned a due diligence report from Mazars. Mazars reported on 22^nd November 2007, noting that Coursemonster generated some 20% of BTP’s revenue for the year 2006-7. For the purpose of this hearing, KGL does not accept this analysis to be accurate.

The Seakom Transfer Agreement was effected on 12^th February 2008. At the end of January 2008 Mr Senior logged the change of SIL’s address to a Hong Kong address. SIL proceeded to invoice BTP for commission which invoices BTP discharged.

The share sale from BTP to KGL took place on 12^th March 2008 under a share purchase agreement. Although the written terms of departure for Mr Senior and Mr Hyslop under the share purchase agreement have not been produced, it appears that those terms including the giving of warranties by them as to BTP’s past profitability. There appears to have been a threshold for any claim under the warranties of £50,000. On 15^th April 2008 BTP changed its name to BTP (Knowledgepool) Limited.

KGL issued a press release on 17^th March 2008 in the following terms :

“In a move to consolidate its position as the UK market leader in managed learning, KnowledgePool has acquired [BTP]……
The BTP brand will be discontinued, although BTP’s CourseMonster brand and booking portal will be an important part of KnowledgePool’s future offering. A cross-functional team will manage the integration of BTP’s operation….”

Upon the share sale Mr Senior left BTP. Mr Hyslop stayed on (although, as will be seen, not for long).

KGL continued to use its own system in parallel with those of BTP. KGL ran different systems which in essence performed the same function. Instead of CRM, KGL used “Salesforce”. Instead of ES, KGL used “Coursebooker”, and instead of Master Financials, it ran “Great Plains”.

Pursuant to a sale and purchase of assets agreement (“the SPA”) KGL formally acquired the business and assets of BTP on 1^st September 2008. The liabilities of BTP “relating to or arising in connection with” any prior breach of contract or breach of duty by BTP were expressly not transferred (by clauses 2.2(a) and 6.1 of the SPA).

In response to an enquiry from Mr Durcan on 5^th September 2008, Mr Paul Jefferson, chief executive of KGL between 2006 and 2010 (“Mr Jefferson”), responded on 10^th September 2008 :

“KP bought the shares in BTP in March. We have since just transferred the assets and business of BTP to KnowledgePool Group Ltd, so that we are operating as one business, which was standard approach to integrating businesses.”

On 11^th September 2008 Mr Durcan wrote to BTP alleging that the transfer of BTP’s rights to KGL constituted a breach of the BTP contract and giving notice that BTP was required to remedy the breach within 30 days as prescribed in clause 6.2.1 of the BTP contract.

On 17^th September 2008 Mr Hyslop sent to Mr Durcan the VPS in which he highlighted the benefit of a continued relationship between KGL and “Seakom”. The document was headed “KnowledgePool” and was signed by Mr Hyslop for KGL. It included the following passages :

“The following document outlines the value that is provided by [KGL] in relation to the partnership arrangement that exists with SeaKom to support CourseMonster. The objective of this document is to demonstrate the fair working arrangement that is in place between both parties which provides a sustainable and successful commercial partnership……

Over the last three years we have continually refined the process and sale approach to support CourseMonster activity…

If we continue to work in the way that we are SeaKom will be receiving greater referral revenue which will provide you with the additional investment that you require to further develop the site.

The partnership is a successful one and there is more work we can do together particularly with the proactive sales activity improving, therefore, I hope that SeaKom will be comfortable that the current commercial deal is more than justifiable and I look forward to your comments with a view to finalising the contractual terms.”

On 30^th September 2008 KGL asked SIL to re-address its invoice for August 2008 commission to KGL (as opposed to BTP) “as we can’t now process invoices post 1^st Sept under the old name”. On the same day Mr Durcan responded as follows :

“As to KnowledgePool it seems we have no option but to start invoicing you as Knowledgepool, and as you confirmed, BTP is no longer trading. However, please be clear that this is in no way an acceptance of any contract with KnowledgePool or the assignment of the contract to them. We reserve all of our rights and position in relation thereto.”

Mr Durcan duly reissued the invoices. The invoice for August 2008 was issued in the name of SIL, showing a BVI company number, Hong Kong banking details and a Hong Kong address. KGL paid the invoice.

The KGL contract was executed on 17^th December 2008. Mr Hyslop left KGL shortly thereafter. His departure heralded a steady decline in relationships between KGL and Seakom.

In late 2008 and early 2009 the number of Coursemonster bookings had reduced significantly, although there was good traffic on the website, causing Mr Durcan to become suspicious of KGL’s management of the relationship. KGL says the downturn was unsurprising, given the global recession at the time. The training industry was particularly susceptible to economic downturn.

Mr Durcan said that he was informed by Ms Smith that throughout the relationship the managed services sales team had been approaching Coursemonster clients and using the database to upsell repeat bookings. Even if a lead came in via Coursemonster or Courselocator it would automatically be transferred to KGL if there was a managed services contract in place (as confirmed by Ms Smith in an email to Mr Durcan of 3^rd February 2009). Ms Smith confirmed that the problem lay in the fact that enquiries through Coursemonster from existing clients were forwarded to the relevant account sales team with no proper logging system (as reflected in an internal email from Ms Smith on 18^th February 2009).

On 11^th February 2009 Mr Durcan took the matter up with Mr Alasdair Bird (“Mr Bird”), the managing director of KGL, who triggered internal action by suggesting a historical overview of the previous two years. By this stage, according to an internal KGL email of 12^th February 2009, it appears that KGL had formed a plan to switch “the service” back in to KGL. KGL wanted to settle with Seakom and then move on to action that plan.

At around the same time Mr Durcan asked SIL’s accountant, Mr Wayne Harris (“Mr Harris”), to inspect KGL’s systems and report. After a one day visit, Mr Harris reported on 24^th February 2009 that there was outstanding commission but that the position was complicated by the fact that the KGL databases had effectively merged leads.

Following that audit, on 27^th February 2009 Mr Durcan wrote to KGL purporting to give notice of termination if KGL failed to remedy the material breach of non-payment of commission.

That led to a meeting at KGL’s offices on 2^nd March 2009 attended by Mr Durcan and KGL representatives including Mr Bird. Approved minutes of the meeting are available and include the following entry :

“It was discussed and agreed that the business process between SeaKom & BTP (and continued under [KGL] was flawed), in that leads had got “lost” after being passed from CourseMonster/CourseLocator with no straightforward/automated way of collectively auditing and cross-referencing leads turning into bookings turning into commission. Certain enquiries were passed directly to other members of BTP/[KGL] staff which appears to contravene the CourseMonster and CourseLocator contract. Claire has since implemented a new procedure to prevent enquiries going astray…”

Further investigations ensued after the meeting, with SIL seeking assurances that systems had been rectified.

On 16^th April 2009 Mr Bird asked SIL to close down the CPW portal on the basis that it played only a limited role in KGL’s service to CPW. Mr Durcan responded on 20^th April 2009 demanding payment of outstanding commissions based on 15% of the gross profits on the sales.

The parties proceeded to seek to resolve their differences. On 3^rd June 2009 Mr Jefferson of KGL wrote to Mr Durcan as follows :

“Bookings from pre-existing BTP and KP clients

Kevin and Craig have confirmed to me that the basis of your relationship and the recognised and established working practice was that BTP clients were never intended to be the target for either CourseLocator or CourseMonster and that there was never an expectation on your part or agreement that you would receive margin on bookings which any of BTP’s clients attempted to make through these two channels. Kevin and Craig will vouch for this and furthermore will vouch for the fact that this was also explicitly discussed and agreed between yourselves. Furthermore, it was understood by both parties that these clients were not able to book through these routes because they had pre-agreed booking processes…..

We recognise that the contract on its own is not as specific as it should be and therefore have attached a contract amendment that very clearly lays out the verbal agreed position and recognised way of working on pre-existing clients and we request that you review and sign this and return copies for signature by myself within the next 10 working days.”

The meaning of the contract advanced above is not the meaning now contended for by KGL. To the extent that there is an issue as to what Mr Senior and Mr Hyslop may have said to Mr Jefferson, I am satisfied that they did say what Mr Jefferson recorded. Mr Jefferson was emphatic about their instructions. Both Mr Senior and Mr Hyslop were copied in on the email and did not demur from the accuracy of what was being said.

Both Mr Senior and Mr Hyslop now accept that what is recorded by Mr Jefferson as to the basis of the relationship and the recognised working practice was incorrect. Nor is it any longer contended that there was any express agreement with Mr Durcan to the effect recorded by Mr Jefferson.

The amendment proposed was a variation to be agreed between KGL and SIL providing :

“WHEREAS

KGL AND [SIL] are parties to a Channel Agreement dated 17^th December 2008 relating to the provision of leads by Seakom and its Associates to KGL and relating to KGL providing agreed services to [SIL] (“the Original Agreement”)

KGL and Seakom now wish to vary the Original Agreement

IT IS AGREED as follows:

……

The Original Agreement shall be varied as set out below :

a)

Commission is not payable to Seakom on Leads from existing clients of KGL or Knowledgepool (BTP) Limited, formerly [BTP]…..”

Mr Durcan declined to sign the proposed amendment.

By 12^th June 2009 at the latest it is clear that KGL, and in particular Mr Philips, had decided to terminate KGL’s relationship with Mr Durcan (subject only to the remotest of possibilities that there might be a turnaround in the relationship). On that day Mr Philips wrote to Mr Jefferson, Mr Bird and Ms Katherine Grover, KGL’s group finance director (“Ms Grover”), in the following terms :

“We need to decide how and when to bring the Seakom contract to an end. There are a few ways of doing this, but I think on balance the best is probably

1)

We terminate now and give 4 months’ notice. We communicate to Kelvin that we are doing this because of his stated intention to sue us, but we are still keen to continue the relationship and the arrangement long-term provided he gives up on his bogus claim and provided he agreed to work with us over the next few months to improve the.. website and the marketing etc…. So, in other words, we accompany the termination with positive, warm words. And we give him no clue we are working on our own portal.

2)

During the four months’ notice period, both parties are obliged to continue abiding by the terms of the contract. During July and August we should put formal pressure on him to make improvements to the website. If he refuses then I think we could probably use the second paragraph in the attached as grounds to terminate the contract immediately in August. Alternatively, if we see any material drop off in leads despite maintaining spending on advertising, then I think we could use first paragraph in the attached to terminate immediately.

3)

We launch our portal as soon after this as possible, and no later than Sept 1^st

4)

If we fail to find cause to terminate immediately in August, then the worst case is to run through the 4 month notice period and launch the new portal at the end of October. This is not a disaster because the bookings should run through at normal levels until the end of this 4 months provided Seakom continue doing what they are supposed to be doing, and if they don’t, then we will invoke the attached clause to terminate immediately….”

KGL’s plan therefore was to end the relationship with Seakom in circumstances and at a time which best suited KGL, bearing in mind its intended launch of its own new training portal. This was a plan which, together with the new portal, it wanted to withhold from Mr Durcan.

Mr Philip’s plan was duly actioned. Under cover of an email dated 17^th June 2009, Mr Jefferson “reluctantly” sent notice of termination to SIL, accompanied by “warm, positive words”. Mr Jefferson stated that he wanted to use the notice as “an opportunity to agree new terms going forward that better reflect the agreed way of working and establish an improved relationship….” That sentiment was echoed in the notice of termination itself which stated that KGL’s objective was to agree new contract(s) over the coming months and stressed a desire to rebuild the relationship with SIL.

Seakom describe KGL’s behaviour as duplicitous. I agree. KGL had no desire whatsoever to continue or rebuild a relationship with Seakom. Mr Philips was at pains to emphasise that this was not normal behaviour by KGL. In essence, KGL had, as he saw it, done everything it reasonably could to meet Mr Durcan’s demands, to investigate his concerns and to follow up on his queries. I accept Mr Philips’ evidence that by this stage KGL saw Mr Durcan as someone fuelled by misguided conspiracy theories and difficult, if not impossible, to work with.

Pursuant to the notice of 17^th June 2009, termination took effect on 17^th October 2009. On the same day KGL announced the launch of MyTrainingExpert (“MTE”). As Mr Philips pointed out in his evidence, there was nothing illegal in the commencement and launch of MTE.

In the hope of resolving matters, in late 2009 and early 2010 Seakom instructed Grant Thornton UK LLP (“GT”) to investigate the question of unpaid commission. Unfortunately that step appears only to have increased costs and added yet further to the controversy. GT made a “best estimate” on the basis of its instructions and the material available to it. In relation to managed services clients, GT was looking for who had made first contact with the customer. The overall figure produced by GT as outstanding commission in its final report dated 17^th December 2010 was some £55,000.

Around that stage Seakom expressly advanced its current case on construction. On seeing an email from Mr Durcan to GT dated 23^rd November 2010 setting out that case, Mr Philips responded :

“This guy is barking mad….his main arguments are pure nonsense….according to him, BTP or [KGL] could have spent six months winning a major [Request for Proposal] to provide a managed service to that customer and then, if one employee of that customer makes one random visit to Coursemonster 3 months later then [sic]he is now saying that Seakom would be due commission on all [gross margin] generated from that managed service from that moment onwards…if he really believed this, why had he not presented this argument consistently over the last 6 years…?”

An action for breach of warranty by KGL against Mr Senior and Mr Hyslop appears to have been contemplated by KGL in 2009 and 2010, arising out of the share sale agreement. Ultimately no such claim was ever advanced. The deadline for any claim was September 2010. Mr Philips said that by that stage he had formed the view that he did not have the material with which to bring a sensible claim. Instead, however, he negotiated with Mr Senior and Mr Hyslop to reduce downwards the sums outstanding to them from KGL on the sale of the shares in BTP. That settlement included an agreement by KGL not to bring a claim for breach of warranty against Mr Senior and Mr Hyslop.

A letter before action was sent on behalf of Seakom on 4^th August 2009. It was then estimated by Seakom that the total sum of underpayment was approximately £3,000,000. The current proceedings were issued on 30^th May 2012.

The relevant provisions of the BTP contract can be rehearsed as follows :

“INTRODUCTION :

(A)

The purpose of this Agreement is to record the terms on which SeaKom and its respective Associates will Introduce Leads to BTP and BTP will provide the agreed services to SeaKom.

(B)

BTP provides training courses and procures the services of third parties to meet the training requirements of Leads.

(C)

SeaKom is a training broker and online marketing company and markets and promotes training courses via a Website.

(D)

SeaKom has pursuant to this Agreement agreed that it and its Associates shall exclusively Introduce all Leads to BTP in consideration for BTP making payments of Commission to SeaKom.

OPERATIVE PROVISIONS :

1.

DEFINITIONS AND INTERPRETATION

1.1

In this Agreement, unless the context requires otherwise, the following words shall have the meanings set opposite them: …

“Commencement Date” means 19 September 2005

“Confidential Information” means any information acquired by either party about the other party’s business and/or given by one party to the other and/or generated by either party from the other party’s information that is either designated as confidential or which the receiving party ought reasonably to realise is of a confidential nature, including without limitation, information relating to a Lead, a Transaction, the existence of this Agreement and its terms or otherwise;

“Initial Term” means a period of 3 years beginning on the Commencement Date;

“Introduce” means the referral to BTP by SeaKom of a Lead that results in BTP organising Training on behalf of SeaKom and concluding a Transaction and “Introduced” shall be construed accordingly;

“Lead” means any person, firm or company who makes a request and/or enquiry for Training to SeaKom and/or an Associate whether through a Website or by any other means;

“Managed

Service” means a strategic arrangement entered into between SeaKom and a Lead on the basis that the Lead will be provided with agreed preferential rates for Training on condition that the Lead refers all business or a specified type of business exclusively to SeaKom as agreed between SeaKom and the Lead;

“Training” means external training courses, seminars, events, presentations, residential courses or other training arrangements to educate or improve knowledge, skills and/or performance;

“Transaction” means any transaction for the provision of Training that BTP executes on behalf of a Lead;

“Website” means any website owned and/or controlled by SeaKom and/or its Associates through which SeaKom and/or its Associates market and promote the sale of Training, including but not limited to the website www.coursemonster.co.uk.

SERVICES

COMMISSION

CONFIDENTIALITY AND DATA PROTECTION

DURATION AND TERMINATION

GENERAL

The KGL contract dated 17 December 2008 was similarly, though not identically, worded :

“CHANNEL AGREEMENT

INTRODUCTION:

(A)

The purpose of this Agreement is to record the terms on which SeaKom and its respective Associates will Introduce Leads to KGL and KGL will provide the agreed services to SeaKom.

(B)

KGL arranges training courses and procures the services of third parties to meet the training requirements of Leads.

(C)

SeaKom is a training broker and online marketing company and markets and promotes training courses via a Website.

(D)

SeaKom has pursuant to this Agreement agreed that it and its Associates shall Introduce Leads to KGL on the terms and conditions set out in this Agreement.

OPERATIVE PROVISIONS

“Business Plan” Means the business plan set out in Schedule 3;

“Commission” means the remuneration to be paid to SeaKom, calculated in accordance with Schedule 1;

“Confidential

Information” means any information acquired by either party about the other party’s business and/or given by one party to the other and/or generated by either party from the other party’s information that is either designated as confidential or which the receiving party ought reasonably to realise is of a confidential nature, including without limitation, information relating to a Lead, a Transaction, the existence of this Agreement and its terms or otherwise;

“Introduce” means the referral to KGL by SeaKom of a Lead that results in KGL organising Training on behalf of SeaKom and concluding a Transaction and “Introduced” shall be construed accordingly;

“Lead” means any person, firm or company who makes a request and/or enquiry for Training to SeaKom and/or an Associate through the Website or KGL’s Templated Version of Your CM;

“Managed Service”

means a strategic arrangement entered into between SeaKom and a Lead on the basis that the Lead will be provided with agreed preferential rates for Training on condition that the Lead refers all business or a specified type of business exclusively to SeaKom as agreed between SeaKom and the Lead;

“Templated Version”

means a fully supported, white labelled version of the Website supplied by SeaKom but where the brand and identity of a third party is applied;

“Transaction” means any transaction for the provision of Training that KGL executes on behalf of a Lead;

“Website” means www.coursemonster.co.uk (or the equivalent website in the event of any rebranding by SeaKom where the www.coursemonster.co.uk website is directly replaced by another site and no longer operates under that name); and

“Your CM” means a Templated Version of the Website commissioned/resourced specifically for KGL by SeaKom.

2.

SERVICES

2.1

SeaKom shall exclusively refer and/or introduce to KGL all Leads.

2.2

Subject to clause 2.3 and 2.4 below, and conditional on the parties meeting their respective obligations as set out in the Business Plan, SeaKom grants to KGL and KGL accepts the exclusive right to provide Training to Leads and SeaKom shall not appoint any other third party to provide Training to Leads.

…

2.7

KGL agrees that if a Lead requests a Managed Service from SeaKom, that any Transaction that KGL enters into with that Lead shall be a Managed Service contracted on behalf of SeaKom. Commission on such Transactions shall be paid in accordance with clause 3 below.

3.

COMMISSION

3.1

In consideration for SeaKom agreeing to exclusively Introduce Leads to KGL, SeaKom shall be entitled to be paid a Commission from KGL in respect of every Transaction that KGL generates following a Lead from SeaKom, in accordance with Schedule 1 and as set out below in this clause 3.

…

3.4

Commission shall be paid to SeaKom in relation to Transactions booked via a Lead prior to the date of termination of this Agreement even if such payment is received after the termination of the Agreement where the Agreement has been terminated by KGL in accordance with clause 6.2 below.

3.5

KGL shall upon reasonable notice by SeaKom allow SeaKom at SeaKom’s cost to inspect all internal records relating exclusively to SeaKom’s dealing with KGL in accordance with this Agreement, provided that SeaKom shall comply with its obligations of confidentiality under clause 5 below. SeaKom shall be permitted to inspect such records a maximum of 8 times in any period of 12 months, provided that no more than one inspection is made in any calendar month. Should the audit provide evidence of a discrepancy of more than 5% against the figures provided by KGL in the Commission statements, then KGL shall reimburse Seakom’s reasonable costs of undertaking the audit.

5.

CONFIDENTIALITY AND DATA PROTECTION

5.1

Each party agrees that it will use the other party’s Confidential Information solely for the purposes of this Agreement and that it shall not disclose, whether directly or indirectly to any third party the Confidential Information other than to its employees, subcontractors and/or advisors where it is required in order to carry out the purpose of this Agreement.

…

5.5

All information collected via the Website in respect of Leads shall remain the property of SeaKom and, to the extent that such information is disclosed to KGL by SeaKom, KGL shall use it solely in order to provide Training to Leads for and on behalf of SeaKom and for no other purpose. KGL shall not disclose any such information to third parties or use it in any way save as is strictly necessary to enable it to provide Training to Leads.

5.6

KGL shall not hold itself out as providing Training to Leads other than on behalf of SeaKom.

6.

DURATION AND TERMINATION

6.1

This Agreement will come into force on the Commencement Date and will continue thereafter unless terminated by either party upon giving not less than 4 months’ written notice to the other party, subject to earlier termination pursuant to the provisions of this clause 6.

8.

GENERAL

8.1

This Agreement and the Schedules constitutes the entire agreement between KGL and SeaKom in relation to its subject matter and supersedes any prior written or oral agreement in relation to its subject matter and the parties confirm that they have not entered into this Agreement on the basis of any representation that is not expressly incorporated into this Agreement.

SCHEDULE 1

Commission

Unless otherwise agreed in writing by both parties, KGL will pay Commission to SeaKom as follows:

CourseMonster

KGL shall pay to SeaKom 40% of its Net Sale Profits in respect of a Transaction.

SCHEDULE 2

Service Levels

Service Description

Point of Contact:

KGL will offer a point of contact to liaise with the Lead’s staff. The telephone line and email will be answered in a professional and polite manner. Alternative methods of contact can also be made available e.g. fax etc. if more appropriate.

KGL’s Employees

All of KGL’s personnel shall be appropriately qualified with suitable training, expertise and skill to provide the education and training services required by SeaKom.

If the circumstances arise where a member of KGL’s staff allocated to the client acquired through the Lead decides to give notice, KGL will inform SeaKom together with the client as soon as is reasonably possible. KGL will replace that individual with another suitable member of staff and a comprehensive hand-over will be conducted.

In the event of sickness or annual leave affecting the Lead point of contact an alternative member of staff will be temporarily allocated.

SCHEDULE 3

Business Plan

•

The objective will be to contact in the region of 100 training providers with the Total Care Plan Concept

•

KGL and SeaKom will identify and target high ranking, commercially fitting websites for Your CM

•

KGL will introduce a number of pro active sales measures to encourage repeat business, - ie identifying training buyers and administrators, pro active follow up calls to these individuals, setting call backs post courses to offer follow on courses where appropriate”.

The draft Courselocator licence included the following provisions:

“…

Gross Sales Profits: means the profit made by Customer on a Transaction before deduction of charges, taxes and advertising costs incurred by Customer or Supplier in the course of performance of this Agreement.

…

Supplier’s Affiliate: includes each and any subsidiary or holding company of the Supplier.

Transaction: means any sale generated through the Domain.

…

2.

LICENCE AND TERM

2.1

In consideration of the Fee paid by the Customer to the Supplier, receipt of which the Supplier hereby acknowledges, the Supplier grants to the Customer a non-exclusive licence to use the System for the period of one year commencing on, and including, the date of this licence and continuing from year to year unless terminated by either party serving not less than 60 days’ notice to expire at anytime …

3.

FEES

3.1

The Customer shall pay to the Supplier a Fee equal to 15% of the Gross Profits. Within 14 days of each calendar month in which Gross Sales Profits have accrued Customer will provide Supplier with a statement of the Gross Sales Profits and Fee, which has accrued. Provided that Supplier sends Customer a valid invoice for an amount equivalent to the Fee set out as due in the statement Customer will make payment within 30 days of receipt of Supplier’s invoice. All sums payable under this licence are exclusive of VAT, for which the Customer shall be responsible. …”

Contrary to the impression created by the volume of documentary and oral evidence adduced by the parties, the issues on liability are in fact limited to the following :

With some encouragement from the court, the parties were able before the commencement of the evidence further to narrow the issues between them as follows :

Thus, only issues a) to e), g) and i) remain for my determination. I have had the benefit of detailed written and oral opening and closing submissions in relation to those issues. I have considered all the material before me in reaching the conclusions that I do, even if I do not consider it necessary to identify below the full detail of some of those submissions.

For Seakom, Mr Durcan gave evidence. For KGL the following witnesses gave evidence :

Where it is necessary for me to make specific findings of fact, I do so in this judgment when the relevant issue arises. In broad terms, however, I record my findings as to the credibility of the key protagonists.

Mr Durcan is an intelligent and knowledgeable man, well-versed in the technology industry. He has clearly lived and breathed this dispute for many years. This, coupled with a deep distrust of KGL and an embedded sense of outrage at the activities of BTP/KGL as he perceives them to be, led to a lack of objectivity and a tendency on his part to be argumentative in evidence. At times I did not find him to be a reliable witness (for example, in relation to whether or not the OPPs reports revealed the identity of an enquiring organisation), and he was prone on occasion to exaggeration. However, I did not form the impression overall that he was attempting to be disingenuous or to do other than give his best current recollection of events in stressful circumstances.

Mr Philips is a sophisticated entrepreneur with an eye for strategic opportunities. Overall he was an impressive witness and I formed the view that he was giving his evidence in a fair and balanced way. He was clearly embarrassed by his negotiating ploy in 2009 and the admittedly “seedy” manner in which Seakom had been treated. He emphasised how exceptionally difficult he was finding Mr Durcan at this stage.

Mr Senior, like Mr Durcan, is not unintelligent. He was uncomfortable in the witness box, perhaps understandably, given the rift that has arisen between himself and his former good friend, Mr Durcan. I did not find him to be a wholly reliable witness either (for example in relation to what he told Mr Jefferson in 2009 as to the basis of his working relationship with Seakom, as set out in paragraph 52 above). Mr Hyslop was surprisingly vague on areas of detail in relation to his time at BTP and KGL, but generally gave his evidence in a straightforward manner.

Seakom contend that on a true construction of both the BTP and KGL contracts, once a person, firm or company made an enquiry through the Coursemonster website (or sent an email to the Coursemonster email address or made a call to the Coursemonster direct number), that person, firm or company became a “Lead”. All subsequent bookings for training made by that person, firm or company gave rise to a commission entitlement in favour of Seakom irrespective of whether each particular booking was made through Coursemonster or was made to BTP/KGL directly.

Looking at clause 3.1 of the BTP contract, Seakom submit :

In relation to the KGL contract, Seakom submit that the entitlement to commission is the same. The difference in the wording of clause 3.1 is immaterial or, if anything, strengthens Seakom’s position: the active involvement of KGL in generating a transaction underlines the lack of any requirement for a causal link between Seakom and a transaction for commission to be payable.

Seakom contrast the wording of the draft Courselocator licence which focussed on individual enquiries and submit that their analysis of the natural and ordinary meaning of the words is consistent with other provisions in the contracts :

Seakom contend that there is nothing uncommercial about such a construction. Mr Durcan described Coursemonster as a “sales lead generator” for BTP/KGL. Seakom had no means of monitoring the development of leads itself. Seakom relied on the fact that Coursemonster leads were to be ringfenced. Coursemonster was a valuable asset, providing in particular details of the dates of courses as well as suppliers, and also an effective means of generating sales enquiries. Seakom point to the launch by KGL of MTE as an indicator of the value of the asset.

Seakom also emphasise that Coursemonster was their only asset. By the contracts they were handing to BTP their entire business. They suggest that, whilst the contracts referred to commission, this was in reality a partnership arrangement (despite the express disavowal of such a relationship in clause 8.4 of both contracts), and the commission should be seen as a profit share arrangement. Moreover, the contract could be readily terminated by either side (on six months’ notice). Thus KGL is wrong to suggest that there was any real permanence in Seakom’s commission entitlement.

KGL on the other hand contends that the contracts provided for commission to be paid in respect of any booking that resulted from a request or enquiry that came via Coursemonster :

If the clear meaning is not as KGL contends, it is said that its construction produces a commercially sensible result, whilst that of Seakom is commercially absurd. So, for example, if KGL had been working with a very large corporate organisation for many years, giving rise to a very substantial annual income, from the moment one employee from that organisation made an enquiry through Coursemonster, Seakom would be entitled to 40% of the income for every year going forward. As soon as an employee of a large organisation “googled” a course on the internet and made an enquiry through Coursemonster, Seakom would be entitled to commission on all future transactions with that company. It did not matter that KGL might have a managed services contract with that company which had been won by devoting hundreds of man hours to winning a competitive tender exercise and creating a bespoke training solution for it.

KGL says that there is nothing inconsistent in other clauses in the contracts, for example clauses 2.6 (or 2.7 in the KGL contract) and 3.4, as alleged by Seakom. Clause 2.6 applies only if there is a request for a managed services agreement from Seakom that the managed service contract will be entered into by BTP on behalf of Seakom. There is no obligation on BTP to seek out managed services business. As for clause 3.4, that simply addresses the situation where a transaction has been booked but not paid for prior to termination.

Finally at this stage, I note that both sides have vacillated on questions of construction. So, for example, in its verified Defence dated 12^th August 2012 KGL contended (in particular at paragraphs 48 to 50) that the proper construction of the contracts was that Seakom had no entitlement to commission on bookings for training made by pre-existing clients of BTP or KGL. That was also said to be the parties’ shared assumption. Seakom was entitled to commission only on fresh referrals which resulted in concluded transactions. By May 2013 that case had changed to a quite different one, namely to the present one, that a transaction with a pre-existing client of BTP or KGL could be commissionable if it was the result of a fresh referral through Coursemonster.

The relevant legal principles can be summarised as follows :

Seakom place reliance on City Alliance Ltd v Oxford Forecasting Services Ltd [2001] 1 All ER (Comm) 233 at paragraph 13 to the effect that before a court can introduce or delete words in a particular clause “it is necessary to be satisfied (i) that the words actually used produce a result which is so commercially nonsensical that the parties could not have intended it, and (ii) that they did intend some other commercial purpose which can be identified with confidence. If, and only if, those two conditions are satisfied, is it open to the court to introduce words which the parties have not used in order to construe the agreement. It is then permissible to do so because, if those two conditions are satisfied, the additional words give to the agreement or clause the meaning which the parties must have intended.”

In my judgment, this statement of principle is either inconsistent with or has at least been overtaken by the approach of the Supreme Court in Rainy Sky (supra), certainly so far as the first suggested requirement is concerned. The more fluid (but still rigorous) approach advocated in Rainy Sky (where City Alliance does not appear to have been cited) as set out above now applies.

Seakom also seek to rely on the principle of “contra proferentem”. This is usually a doctrine of last resort arising only in a case of true ambiguity – see The Olympic Brilliance [1982] 2 Lloyds Rep 205. In Direct Travel Insurance v McGeown [2003] EWCA Civ 1606 the Court of Appeal stated as follows :

“A court should be wary of starting its analysis by finding an ambiguity by reference to the words in question looked at on their own. And it should not, in any event, on such a finding, move straight to the contra proferentem rule without first looking at the context and, where permissible, aids to identifying the purpose of the commercial document of which the words form part.”

I take the question of construction first by reference to the BTP contract and then in stages :

Looking at the strict wording of clause 3.1 by itself, Seakom was entitled to commission “in respect of every Transaction entered into by BTP with a Lead”. “Lead” is defined as “any person who makes a request and/or enquiry for Training to Seakom and/or an Associate whether through a Website or by any other means” (emphasis added). In my judgment, the use of the present tense in the definition of “Lead” is significant. It indicates a causal link between the making of an enquiry and being a “Lead”. It makes it clear that the definition is only operative whilst a request or enquiry is pending. Thus Seakom was not entitled to commission by reference to any transaction with a “Lead” but only one that was the result of a request or enquiry via Coursemonster.

Looking at clause 3.1 in the whole context of the BTP contract demonstrates the correctness of the above construction :

The position is also consistent with what was known to the parties at the time – namely that retail sales via Coursemonster and managed services accounts were parallel and quite distinct streams of the business of BTP and KGL (see for example the evidence of Mr Hyslop at paragraph 15 of his witness statement). The differences between the provision of retail portal and managed services are many. For example, profit margins on managed services business are materially lower than on retail business, and managed services are remunerated via a service fee, whilst retail portals make money on the difference between the buy and sell price of the training. Managed services are contracted following typically a lengthy tender based sale and can generate thousands of bookings per year, whilst a retail portal pays a few pounds per enquiry via Google. Managed services clients are typically large corporate clients outsourcing their training activities.

For the avoidance of doubt :

For these reasons, I have reached the clear conclusion that KGL’s construction of clause 3.1 is correct : Seakom was only entitled to commission on bookings that resulted from a request or enquiry that came through Coursemonster. This is what a reasonable person would have understood the contract to have meant at the time.

If I am wrong in the above conclusion, and there are two possible constructions, then I would favour KGL’s interpretation as being the more commercially sensible. If necessary, I would go so far as to hold that Seakom’s construction of the BTP contract would lead to a commercially absurd result.

On a broad level, KGL’s interpretation accords with the general rule that an agent is only entitled to commission on a transaction where his services are the effective cause of the transaction being brought about (see Article 57 of Bowstead & Reynolds on Agency (19^th Ed)). Whether or not the parties regarded their relationship as an (undefined) working partnership of some sort, the agreement on its face is clearly and expressly a contract for the payment of commission and not a partnership agreement. Other provisions are also consistent with an agency, as opposed to a partnership, arrangement. For example, Seakom was entitled to commission based on a division of gross, not net, profits.

Moreover, looking at matters as they stood at the time of the contract, at the highest (and most favourably to Seakom) it could be said that the parties did not know whether or not Coursemonster enquiries would lead to managed services agreements for BTP, or to what extent that might happen. Such enquiries might or might not have done. Against that background and without more, it seems wholly unrealistic to suppose that BTP (or KGL) would have handed over to Seakom commission on all managed services contracts when Coursemonster may have played no part in obtaining or maintaining that income stream.

It is also legitimate at this stage of the exercise to look at the consequences of Seakom’s construction being correct. Whatever “upselling” or desire to obtain repeat business there may have been, it is an extreme position for Seakom to be entitled to 40% of gross profit on a transaction where the connection between the transaction and the enquiry to Coursemonster was either non-existent or of only the most tenuous nature.

KGL’s witnesses were at pains to emphasise the lack of commerciality in Seakom’s position. By way of example, Mr Bird said this in relation to KGL’s construction :

“It did not matter…that KGL might have a managed service contract with that company which had been won by devoting hundreds of man hours to winning a competitive tender exercise and creating a bespoke training solution for them. The simple act of a single employee failing to read their training procedures and making an enquiry (not even a booking) through the Coursemonster website was..sufficient to entitle [Mr Durcan] to 40% commission on an account handling thousands of transactions and generating millions of pounds per year.”

And as set out above, in November 2010 Mr Philips put it this way :

“So, according to [Mr Durcan], BTP or [KGL] could have had first contact with a customer, could have spent six months winning a major [Request for Proposal] to provide a managed service to that customer and then, if one employee of that customer makes one random visit to Coursemonster 3 months later then he is now saying that Seakom would be due commission on all [gross margin] generated from managed service from that moment onwards.”

Seakom’s attempts to counter a lack of commerciality fell on stony ground. The risk of stray enquiries to Coursemonster from managed services clients was not just a theoretical one, as Mr Bird explained. Such enquiries were also only trivial in value. Mr Philips was also clear that a retail enquiry through Coursemonster would not grow into a fully fledged managed services contract. There was no commercial rationale to a single retail enquiry by a single employee of an organisation capturing the entirety of a wholesale business. I accept his evidence in this regard.

As for the specific matters relied upon by Seakom :

In the light of my findings above, the principle of “contra proferentem” is of no assistance to Seakom.

I reach the same conclusion in relation to the KGL contract for the same reasons. It is not pressed by either party that there is any material difference in the contracts or the position and understanding of the parties on this issue. If there is a difference in the wording of the contracts, in my judgment it is a difference that strengthens KGL’s position. Clause 3.1 refers to commission on a “Transaction” “generated following a Lead” (emphasis added). This indicates a direct causal requirement between the generation of a transaction and the making of an enquiry.

In the light of my findings on construction, it is not necessary for me to rule on this issue, but I do so for the sake of completeness, and because so much of the evidence was directed at it.

KGL argues that Seakom are now estopped by convention from disputing KGL’s construction of clause 3.1. It says that, whatever confusion there was in relation to the precise scope of clause 3.1, there was at all material times a shared common assumption that Seacom were not entitled to 40% commission by reference to all transactions undertaken by leads. It says that it would be unconscionable to allow Seakom now to resile from that assumption.

KGL contends that it is “abundantly clear” from the documentary and witness evidence that Seakom’s current interpretation of the BTP and KGL contracts only occurred to them in the latter part of 2010 at the earliest (by which time GT had produced figures too low for Seakom’s liking).

KGL contends for a common assumption that is both positive and negative. As to the negative, KGL relies on the fact that Mr Durcan never advanced the construction now contended for by Seakom until November 2010. As to the positive, KGL points to a series of emails between 2005 and 2009. It is said that Mr Durcan did not act in a manner consistent with a belief in Seakom’s current position. Thus he did not, for example, check weblogs, require different management reports, or invoice in a manner consistent with what is now said. He never suggested ringfencing. Where Seakom did refer to the contractual definition of “Leads” in correspondence and communications, it was in the context of enquiries into individual transactions, not managed services business.

Reliance is placed in particular on the following events :

Mr Durcan was also cross-examined on related matters. Emails were put to him as being “flatly contradictory” with Seakom’s case as now advanced. In particular:

Mr Durcan readily agreed that Seakom had the above concerns. He denied any inconsistency in the expression of such concerns and a belief that Seakom was entitled to 40% commission on all transactions undertaken by leads. Indeed, he genuinely appeared unable to understand KGL’s point. He said that the creation of a means of cutting down enquiries was not inconsistent with a case whereby Seakom would be entitled to a 40% on a single enquiry that could lead to much more. He wanted to free up Ms Smith’s time so that she would have more time to “upsell”. Moreover, he trusted her to pick up on any potentially large enquiry and not let it go. She was, he said, “very astute” at identifying the important leads.

Seakom deny that any estoppel arises. They say that there was no shared or common assumption as alleged, and no mutually manifest conduct. Nor has any case of detrimental reliance been made out. Seakom also argue that clause 8.1 of the contracts (the “entire agreement” clause) precludes a defence of estoppel.

Estoppel by convention arises where both parties to a transaction act on an assumed state of facts or law, with the consequence that they are estopped from denying the truth of the assumption, where it would be inequitable to do so. The assumption must be either shared by both parties, or may be made by one and acquiesced in by the other.

The judgment in ING Bank NV v Ros Roca SA [2012] 1 WLR 472 at paragraph 55 confirms that the leading statement of the law on estoppel remains that in Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878 at 913-914 where Lord Steyn stated :

“It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of any estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption…..it is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for estoppel by convention.”

It is not enough that the common assumption upon which the estoppel is founded is merely understood by the parties in the same way. It must be expressly shared between them. This requires one party to have acted so that “across the line” between it and the other party, a belief or expectation is created in the mind of the other party. That requires “mutually manifest conduct”. Mere silence or inactivity will not give rise to an estoppel by convention – see K. Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd [1985] 2 Lloyds Rep 28 at page 35 and HIH Casualty & General Insurance Ltd v AXA Corporate Solutions [2002] 2 All ER (Comm) 1053 at paragraph 26.

Moreover, the expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the party to rely upon it – see Revenue and Customs Commissioner v Benchdollar Ltd and others [2010] 1 All ER at paragraph 52. And an estoppel can only operate for the period of time and to the extent required by the equity which the estoppel has raised – see again Benchdollar (supra) at paragraph 43.

Whether or not resilement would be unconscionable depends on the facts and all the circumstances of the case, but typically arises where the party claiming the protection of the doctrine has acted in reliance to his detriment on the assumption. Indeed, the foundation of the estoppel is detrimental reliance. Unconscionability is something to be viewed “in the round”, with due weight being given to all relevant factors (see Benchdollar (supra) at paragraph 64).

I reject at the outset Seakom’s contention that clause 8.1 of the contracts precludes an estoppel defence. It is not a position supported by the authorities. An “entire agreement” clause such as the one here might preclude reliance on prior extra-contractual promises but not a shared interpretation as to the meaning and effect of the contract – see Sere Holdings Ltd v Volkswagen Group United Kingdom Ltd [2004] EWHC 1551 and Lloyds v MGL (Rugby) Ltd [2006] EWCA Civ 153.

In closing, Seakom’s position refined to a position whereby it was accepted that there was no bar to KGL seeking to mount an estoppel by reference to post-contractual events. Seakom contend that clause 8.1 of the KGL contract precludes an estoppel arising by reference to prior events. Clause 8.1 of the KGL contract is said to be a “reaffirmation” of the BTP contract and so precludes any prior estoppel. I was not taken to any authorities directly on this point.

I am unable to accept this proposition either. Clause 8.1 of the KGL contract governed the parties’ position under that contract. It does not seem to me to be capable of affecting the parties’ rights under the BTP contract. Thus, in relation to a claim by Seakom under the BTP contract, KGL is entitled to maintain an estoppel defence by reference to events after but pursuant to that contract. In relation to a claim under the KGL contract, KGL is entitled to maintain an estoppel defence by reference to events after and pursuant to that contract.

The real first question is whether or not there was a shared assumption as alleged and sufficiently clear conduct on the part of Seakom that “crossed the line”.

For the reasons set out below, I am not satisfied that such an assumption and/or conduct has been established. There was no clear or unequivocal manifestation by Seakom that they did not understand that they were entitled to 40% commission by reference to all transactions undertaken by leads.

I turn first to KGL’s pleaded case (at paragraph 52 of its Defence). There KGL relies on :

However, as is already apparent, KGL’s case at trial went well beyond the one that was particularised. Putting that objection to one side, I address the additional matters raised by KGL.

In relation to early events and exchanges, the context was that Mr Durcan initially understood that managed services clients would not be making enquiries via Coursemonster. Mr Durcan did not have any visibility in relation to managed services clients, nor did he know who they were until 2009 at the very earliest and, according to him, until June 2013. Whilst it was put to Mr Durcan in terms that he was lying in relation to what he saw in 2009 when he had temporary access to the Enterprise Studay database, KGL have not produced any document to show that he would necessarily have seen the identity of KGL’s managed services clients.

Such lack of knowledge might not have been a bar to the raising of a generic invoice or entitlement by Seakom, but it might certainly explain why none was raised. The issue of managed services clients would not have been a matter at the forefront of Mr Durcan’s mind.

The position in relation to later events is even more difficult for KGL. By late 2008/early 2009 it was clear that the relationship was breaking down. In early 2009 Mr Durcan was beginning to discover the inadequacies and errors in the systems of BTP and KGL. Some of the communications relied on by KGL are marked “without prejudice”. I accept Mr Durcan’s evidence that at times he was saying or writing things in order to catch KGL out, not necessarily setting out his true position. The communications relied on were created in a climate of increasing mutual distrust, and anything said or done in these later stages must be seen in this context. This hardly sits easily with the notion of an assumption of responsibility by Seakom. Moreover, they passed in the context of the particular points of dispute that arose at any one time. So, for example, between February and June 2009 the dispute centred on Seakom’s entitlement to commission on transactions with pre-existing clients of BTP/KGL.

In summary, I accept in general terms that Seakom’s conduct was, viewed objectively now, not consistent with the contractual construction for which Seakom now contends. But that is far from determinative of the issue. Whether or not the communications and/or conduct relied on by KGL were partially or wholly inconsistent with Seakom’s case now, I have found nothing sufficiently clearcut for an estoppel to arise. Context is everything and, when viewed in context from time to time, I am not satisfied that Mr Durcan himself positively believed that he was not entitled to 40% of all commissions on transactions by leads or that any such understanding was clearly shared. In any event I find no clear conduct on his part viz-a-viz KGL to manifest such an understanding, nor conduct indicative of an assumption of responsibility in the sense of conveying an understanding which he expected to be relied on. I also do not believe that KGL at the time analysed the contents of the emails in the detailed forensic manner now advanced, nor was the significance now accorded to the emails then attached to them by KGL.

Finally on this issue, I am not persuaded that it would be unconscionable now to allow Seakom to adopt the position on construction that they do. First, this is a case where, as set out above, both sides’ interpretation of the contracts has fluctuated from time to time (even if on different issues). Significantly, the alleged shared understanding has changed materially in scope. It was initially KGL’s pleaded case that Seakom was not entitled to any commission on transactions entered into with pre-existing clients of BTP/KGL. As already indicated, this is no longer its case. This all serves to demonstrate the difficulty, amongst other things, of establishing an estoppel by convention by reference to an alleged contractual interpretation.

Secondly and significantly, KGL’s voluminous witness statements are completely silent on the question of prejudice or unconscionability. It was suggested for the first time in submission that the unconscionability lay in the fact, that had Seakom revealed their hand, BTP and/or KGL could have terminated the contract earlier than they did.

KGL sought to make good the evidential lacuna in its case in this regard by asking Mr Bird in examination in chief what he would have done if he had known at the time that the KGL contract was concluded, that Seakom were asserting an entitlement to 40% commission on managed service business following an enquiry through Coursemonster. Mr Bird said that he would not have agreed the contract on those terms. He went on to say that KGL would have terminated the KGL contract as soon as possible had he learned of such an assertion during the KGL contract.

I was not impressed by this fresh evidence (which should not have been adduced for the first time orally in examination in chief without notice and without permission). Further, Mr Bird did not join KGL until June 2008 and did not become particularly aware of Coursemonster until 2009, at best six months before notice of termination by KGL was given in any event. Mr Bird’s evidence was also not necessarily persuasive : KGL was a robust entity, perfectly capable of taking a very hard line on the merits of Mr Durcan’s claims. I refer for example to the apparent decision of Ms Grover and Mr Jefferson to make no provision in the accounts for BTP ending September 2008 for any liability to Seakom. KGL may well simply have rejected Seakom’s construction of the contracts as absurd, dismissed it out of hand and carried on with the revenue stream from Coursemonster until MTE was ready to launch. KGL’s position on this issue strikes me as artificial and on any view an afterthought.

This is an issue formally for me to resolve on the application of Seakom. KGL is neutral on the point.

Seakom contend that SL’s rights under the BTP contract were assigned to SIL under the Seakom Transfer agreement. However, by clause 8.2, those rights could not be assigned without BTP’s prior written consent (such consent not to be unreasonably withheld or delayed).

What Seakom contend is that BTP gave such written consent, alternatively that BTP waived the requirement for such consent.

The evidence relied upon is Mr Senior’s awareness of SL’s intention to assign it rights under the BTP contract from as early as May 2007. On 6^th May 2007 Mr Moeller emailed Mr Senior asking him to ignore a “BVI” invoice, although SL would probably “look to switch over the month following”.

Mr Durcan’s unchallenged evidence was that he discussed the transfer of February 2008 with Mr Senior. Mr Senior agreed that that was fine and did not insist on the formality of written consent. He understood that it made no difference to how the parties worked together. At no stage did BTP object to continuing with SIL instead of SL. Mr Senior’s evidence was that he could not remember being asked for permission for transfer of SL’s business to SIL.

I accept Mr Durcan’s evidence on this point, which resonates with the close friendship between the two men at that time. Mr Senior also stated in evidence that he viewed it as Mr Durcan’s business and was happy to pay the invoices he provided.

Mr Durcan’s evidence is also consistent with emails in January 2008 where Mr Durcan and Mr Senior were discussing outstanding invoices to SIL and where Mr Durcan was asking Mr Senior to note SIL’s change of company address to Hong Kong. BTP duly paid SIL invoices in respect of commission under the BTP contract.

In summary, whilst I do not accept that prior written consent for the purpose of clause 8.2 of the BTP contract was obtained, I do accept that by its conduct referred to immediately above BTP waived the requirement for such consent.

SL’s rights under the BTP contract were therefore transferred to SIL by the Seakom Transfer Agreement.

Seakom contend that a novation by conduct occurred on or about 1^st September 2008, when KGL acquired BTP’s assets and undertakings. The issue matters because BTP is not a defendant, having now been dissolved. Without a novation (or some sort of transfer of liability) to KGL, Seakom have no remedy for breaches pre-dating 17^th December 2008.

Seakom point to the following on novation :

Seakom also seeks to rely, by way of alternative, on a transfer of liability arising out of an assignment of the BTP contract to KGL under the SPA. It is common ground that the benefits of the BTP contract were assigned to KGL under the SPA. The question is whether the burden (or part of it) was as well. Seakom suggests that where a contractual benefit is so intrinsically connected with a contractual burden, the former cannot be assigned without the latter. It is said that the obligation to pay all outstanding commission under the BTP contract passed, alternatively the obligation to pay all outstanding commission on transactions entered into after 1^st September 2008 passed.

KGL’s focus is simple : Seakom never consented to KGL stepping into the shoes of BTP. Indeed, the position is starker than that : Mr Durcan expressly rejected any such alteration in his email of 30^th September 2008 set out in paragraph 41 above.

Rights and obligations under a contract may be transferred to a third party by novation. On novation, pre-existing rights and obligations are extinguished and new rights and obligations created in their stead.

With the consent of both contracting parties, all contracts of any kind may be transferred. Both the original parties and the new parties must agree : see for example Rasbora Ltd v JCL Marine Ltd [1977] 1 Lloyd’s Rep 645; The Blankenstein [1985] 1 WLR 435; The Aktion [1987] 1 Lloyd Rep 283.

The necessary agreement may be express or may be inferred from conduct. Sufficient evidence of novation by conduct has been found where the third party makes payment in respect of a liability of one of the original contracting parties – see Re Head [1894] 2 Ch 236.

In relation to its alternative claim based on a transfer of liability arising out of an assignment under the SPA, Seakom suggests that where a contractual benefit is so intrinsically connected with a contractual burden, the former cannot be assigned without the assignee assuming responsibility for the latter – Tito v Waddell (No 2) [1977] Ch 106. The “pure” principle of benefit and burden as expressed in Tito v Waddell (No 2) was disapproved by the House of Lords in Rhone v Stephens [1994] 1AC 310. But a narrower principle has survived, as reflected in Davies v Jones [2010] 1 P & CR 22 at paragraph 27. There the modern law was summarised as follows :

“(1)

The benefit and burden must be conferred in or by the same transaction. In the case of benefits and burdens in relation to land it is almost inevitable that the transaction in question will be effected by one or more deeds or other documents.

(2)The receipt or enjoyment of the benefit must be relevant to the imposition of the burden in the sense that the former must be conditional on or reciprocal to the latter. Whether that requirement is satisfied is a question of construction of the deeds or other documents where the question arises in the case of land or the terms of the transactions, if not reduced to writing, in other cases. In each case it will depend on the express terms of the transaction and any implications to be derived from them.

(3)The person on whom the burden is alleged to have been imposed must have or have had the opportunity of rejecting or disclaiming the benefit, not merely the right to receive the benefit.”

Seakom therefore argues that, despite clause 2.2 a) in the SPA, the limited burden of the obligation to pay commission under the BTP contract was necessarily transferred to KGL as it received the benefits of the BTP contract.

To complete the link, Seakom then says that it waived the requirement for consent in clause 8.2 of the BTP contract by conduct - see The Kanchenjunga [1990] 1 Lloyds Rep 391 at 397 to 398. Seakom rely on the same or similar conduct as that relied on in relation to consent to novation, but specifically refers to an email from Mr Durcan to Mr Bird on 14^th May 2009 in which Mr Durcan seeks payment of £1,900 from KGL and asks for Mr Harris to have access to “company accounts since 2005…”.

I address the question of novation first. In my judgment there is clear evidence from which novation by conduct can properly be inferred, all subject to the question of consent by Seakom, which I address separately below.

I do not lay any weight in the context of novation to the contents of BTP’s final accounts signed off by Ms Grover and Mr Jefferson in July 2009, or to the possibility that the outstanding debt from KGL was written off by BTP shortly before BTP’s dissolution. As to the accounts, I accept Ms Grover’s evidence that there was no provision in the accounts because she was completely satisfied that it was not necessary, and indeed would be wrong, to do so. She had formed the view, after extensive investigations by KGL, that there was no material exposure to Seakom. The absence of provision did not reflect the fact that KGL had assumed the liability. As to the position on dissolution, the evidential picture is unclear. I note that Seakom did not put any of these matters to Mr Philips. This was a tactical decision by Seakom, but it was clear to me that Mr Philips could have spoken to the issues. The fact that it was not put to Mr Philips affects the weight to be attached to Seakom’s submissions in this regard. Nor do I find helpful any reliance on Mr Jefferson’s indications to Mr Senior and Mr Hyslop of a potential exposure on their part to KGL under their warranties of at least £50,000. In my judgment, as Ms Grover surmised, these are more likely to have been tactical negotiating ploys by Mr Jefferson and KGL than anything else.

However, there is other compelling evidence of novation including the following :

The real potential problem for Seakom on novation is Mr Durcan’s email of 30^th September 2008. By that email he expressly stated that he was not, by agreeing to address invoices to KGL, in any way accepting any contract with KGL or any assignment to KGL.

In cross-examination, when a final refusal was put to him, Mr Durcan said this:

“No. It says – you know, the sentence that you have missed out in that paragraph “We reserve all our rights”. The position in relation thereto- you know, the value proposition clearly states that what had existed with regard to the relationship – it was talking about how the relationship had gone on. It was a continuation. They continued the business. The staff that were working on it were, you know, transferred over on to [KGL] contracts….it was a continuation….we were just changing the names of the contract, it was a continuation of the relationship that already existed.”

In re-examination Mr Durcan said :

“We had to start – they started, you know – we had to start invoicing [KGL]. There was no choice. They – we started invoicing them and they were paying for, you know, courses that were booked prior to September 2008. And then the [VPS] came about, talking about the relationship that already existed and then there was a continuation. I mean the main point of the contract that we entered into, it was a continuation, and the only real reason that we changed anything in that – we were just changing the names of the contract, it was a continuation of the relationship that already existed.”

Mr Durcan did reserve his rights in the email of 30^th September 2008 but, as KGL points out, one can only reserve pre-existing rights. There were no such relevant rights to assist Seakom on this point. On the face of it, in the email, Mr Durcan was rejecting outright any possible novation - at least at that point in time.

However, I find that this email was what was by then becoming typical posturing and trouble-making on the part of Mr Durcan. He was in “objection” mode as a matter of principle – if he could disagree with something that he thought that KGL wanted, he would. In substance and reality, based on his conduct overall, I find that he did agree to the novation. There were a number of events after the email of 30^th September 2008, including the scope of the 2009 audit and the proposed amendment agreement, indicative of a fully consensual novation. There was no suggestion, for example, that Mr Durcan declined to sign the proposed amendment agreement because he rejected a novation with KGL. Rather he declined because of the suggested amendment in relation to commission on transactions with pre-existing customers of BTP/KGL. He treated KGL as stepping into the shoes of BTP. He continued to provide the services and he invoiced KGL. The reality was that there was a seamless transition from the contractual relationship between SIL and BTP to one between SIL and KGL.

That makes it unnecessary for me to consider Seakom’s alternative argument on conditional burden and benefit advances. I find it difficult to understand how it would advance Seakom’s position materially, were Seakom’s claim on novation to fail. Waiver would still fall to be established. And if the alternative argument works at all, its influence would in my judgment be limited to the assignment of an obligation to pay commissions on transactions entered into after, but not before, 1^st September 2008. Only that obligation was so inextricably intertwined with the transfer of the benefit in question as to fall with the conditional benefit principle that survives Rhone v Stephens (supra).

Seakom’s pleaded case is that following termination of the KGL contract, KGL (in breach of contract) continued to use the trading style of Coursemonster and held itself out as the operator of Coursemonster. That holding out is said to demonstrate the wrongful use of information collected via Coursemonster for its own purposes and that KGL continued to market training services to Leads on its own account and not on behalf of Seakom.

No claim of a continued use of the trading style of Coursemonster or wrongful holding out was in fact advanced on the evidence before me by Seakom. On this issue Seakom therefore fails without more.

However, for the sake of completeness, I address the submissions made by Seakom in closing, namely that Ms Smith’s “courtesy calls” made post-termination on behalf of KGL amounted to a breach of clause 5.5 of the KGL contract. Reliance is placed on the fact that, as a result of one of those calls, KGL was said to be able to win the business of one of Coursemonster’s biggest clients, Qedis. It is said that KGL was essentially unlawfully soliciting Coursemonster clients with a view to selling its new portal to them.

I reject this claim. I accept the evidence of Ms Smith that in making the calls that she did, she was not seeking out new business but rather, as a matter of “old-fashioned” professional courtesy, to thank the customer for the past business. She had developed very good relationships with some of the customers, including in particular Qedis,

KGL seeks to bring what it describes as a “conditional” counterclaim to cover the eventuality of a finding in due course that KGL has in fact overpaid commission to Seakom in some instances. It wishes to set-off any such sums against any sums found to be due to Seakom. There are additional claims for damages pleaded by way of counterclaim but those have not been pursued by KGL.

In my judgment, this is not in reality a question of a “conditional” counterclaim, but rather a question as to the terms of any account.

If there is to be an account on the question of commission, which is the remedy sought by Seakom, it must be a full account. There would be a determination as to the sums owing to Seakom, if any, in the round and taking into account any overpayments by KGL.

In these circumstances, there is no need for a “conditional” counterclaim of the type envisaged by KGL.

In conclusion and for the reasons set out above, :

The outcome on the principal question of construction will no doubt come as a grave disappointment to Seakom. Mr Durcan has a strong sense of grievance against BTP and KGL. His sense of outrage at the manner in which he believes that Seakom have been treated in relation to Coursemonster referrals will only have been fuelled by his discovery in the course of this litigation of the underhand manner in which Seakom were dealt with by KGL in 2009. But the central questions of construction are ones to be resolved by reference to matters as they stood at the time that the contracts were entered into and cannot be affected by such subsequent events.

I invite the parties to draw up a composite order reflecting the above conclusions and including the agreement reached between the parties in relation to the CPW Portal and limitation. I also ask the parties to seek to agree costs and any further directions as far as possible. Any matters not capable of agreement should come back to me for my determination and any directions or final orders will in any event have to be the subject of court approval.

Finally, I would like to thank all counsel for their assistance and the constructive and courteous manner in which this trial has been conducted.