Vertex Data Science Ltd v Powergen Retail Ltd

Powergen’s first argument on this application is that by reason of clause 19 of the MSA Vertex has no right to permanent injunctive relief and on 28 April 2006 it sought a stay of Vertex’s claim pursuant to s.9(4) of the Arbitration Act 1996. It follows, says Powergen, that as Vertex has agreed to submit disputes to arbitration, and agreed that the arbitrator shall have no power to grant injunctive relief, so Vertex is attempting to evade its bargain by seeking both an interim and a permanent injunction from the court.

Vertex complained at the hearing that this is a new contention, not previously foreshadowed in the correspondence or in the evidence. Vertex’s Particulars of Claim contain the following paragraphs: -

“18.

Clause 19 of the MSA contains provisions referring certain disputes to resolution by an expert, and certain other disputes to resolution by arbitration. However:

18.1

by Clause 19.4.3, the powers given to an arbitrator under s.48(5) of the Arbitration Act 1996 to grant injunction, order specific performance and/or make declarations were excluded; and

18.2

Clause 19.6 permits the parties to apply to this Honourable Court in order (amongst other things) to seek relief in relation to a genuine dispute between the Parties which is not capable of being referred for resolution in accordance with the mechanisms provided for in Clause 19.

19.

The present action is a claim falling within Clause 19.6 of the MSA. It is not within the power of an arbitrator to grant the relief sought herein, and the claim is accordingly not capable of being referred to an arbitrator for resolution.

20.

The Claimant may also, however, in due course claim damages for breach of the MSA and/or other sums due thereunder, in the alternative and/or in addition to the present claim. The Claimant reserves the right to claim these damages and/or other sums in arbitration proceedings, to be commenced in accordance with Clause 19.4 of the MSA.”

That notwithstanding, Vertex says that it did not appreciate that Powergen would join issue with it over the proper construction of clause 19. Vertex did not however seek an adjournment of the hearing in order to enable it to place before the court further evidence allegedly relevant to the factual matrix in the light of which the contract should be construed. Vertex did contend that I do not have to resolve the question of construction at this stage. It is, submits Vertex, sufficient for its purposes that I conclude that Vertex has a triable case that a final injunction might be ordered by the court. I do not think that this can be right. If the effect of clause 19 is that Vertex has agreed not to apply to the court for injunctive relief I should by granting such relief on the basis that the contrary proposition is arguable and must be decided at trial thereby irretrievably have deprived Powergen of the benefit of an important and substantial part of the bargain which it struck. In my judgment the proper construction of the arbitration clause is a point which I can and should finally resolve now. If satisfied that the parties have agreed not to resort to the court for permanent injunctive relief in circumstances such as those which here obtain, the court ought not in my judgment to grant interim injunctive relief.

The nature of a dispute which either party has the right to be required to be referred to arbitration is widely defined. It includes any cause of action and any dispute concerning the parties’ remedies under the agreement. The opening words of clause 19.6 provide a comprehensive and overriding agreement not to resort to the court save as provided in five sub-paragraphs of which only the last can in my judgment be relevant. Clause 19.6(i) reflects s.44 of the Arbitration Act 1996, which includes express reference to the granting of an interim injunction. However if the arbitrator has no power to grant an injunction – as here he does not, see clause 19.4.3.2 – and if on a true construction of the agreement the parties have agreed not to apply to the court for a permanent injunction, then the present application cannot be said to be a claim for interim relief pending the resolution of the dispute in accordance with the provisions of the agreement. Pursuant to the agreement, on this hypothesis, a permanent injunction cannot be sought and so the interim relief is equally unavailable. Vertex can in my judgment justify this application only if clause 19.6(v) on its true construction permits it to be made. Vertex says that the dispute is not capable of being referred for resolution pursuant to clause 19 because it is a claim for declaratory relief, a permanent injunction and, in effect, specific performance. This approach is dependent upon characterising the dispute in terms of the remedies sought, rather than the cause of action sought to be enforced. The wide definition of dispute makes such a characterisation possible.

The result for which Vertex contends, as foreshadowed in paragraph 20 of its Particulars of Claim, is undoubtedly clumsy. It contemplates seeking damages in arbitration should it fail to obtain a permanent injunction from the court at trial. It also however contemplates seeking damages in arbitration in addition to any permanent injunction which it may obtain from the court at trial. The difficulties into which this suggested division of responsibilities lead the parties are well illustrated by paragraph 6.4 of Vertex’s skeleton argument for this application which reads: -

“Were Vertex making a claim for damages arising from the purported termination of the MSA, it would have been able to agree (subject to the Court) a regime with Powergen whereby an arbitrator resolved that damages claim, on the basis that his findings would be put before the Court in order to enable it to consider the claims for final relief made in this action.”

The difficulty with this approach is that Powergen would be under no obligation to agree to such a regime. Like Bingham LJ in Ashville Investments v. Elmer Ltd [1989] QB 488 at 517 “I would be very slow to attribute to reasonable parties an intention that there should in any foreseeable eventuality be two sets of proceedings.”

The arbitration agreement in clause 19 of the 2005 MSA is widely different from that which appeared in the 2003 agreement. Lord Grabiner suggests that in the light of the history of dispute and renegotiation it is unsurprising that the parties should have agreed that damages should be the only remedy for breach of the 2005 MSA. Mr Mill for Vertex contends that to the contrary in the light of Powergen having proved itself so unreliable a contracting partner it would have been foolish indeed for Vertex to have given up so significant a weapon in its armoury. Of course these arguments are difficult to evaluate without knowing the relative bargaining strength of the parties when they made the 2005 MSA. On balance I should have thought that the result of the renegotiation speaks for itself and that Vertex cannot have regarded itself as having had a strong hand. There may be other considerations of which I am unaware. Of equal if not greater importance, I doubt if Vertex would have been advised that it enjoyed a strong prospect of obtaining injunctive relief in the event that Powergen attempted to terminate the Agreement, though doubtless any advice would have been tempered by an inability to foresee every eventuality in which such relief might be sought.

Powergen contends that the wording of clause 19.6(v) and in particular the words “not capable of being referred” reflect the words of s.9(4) of the Arbitration Act 1996 and contemplate the existence of some external barrier to implementation of the arbitration clause, for example, a breakdown in the mechanism for constituting the tribunal. They do not apply where one party’s claim would be bound to fail or where particular remedies are unavailable to the arbitrator and they pray in aid what was said by Mustill LJ in Societe Commerciale de Reassurance v. Eras International [1992] 1 Lloyd’s Rep 579 at 610: -

“As we understand it, the proposition advanced is that parties cannot have intended to submit claims to arbitration of a kind which, if the chosen tribunal were to entertain them, would be bound to fail. We do not agree. Parties not infrequently find that by choosing a foreign substantive or procedural law their rights are less than they would have been if they had made a different choice or had allowed the contract to remain silent….By including an Illinois arbitration clause Clarksons acquired all the advantages and assumed all the disadvantages of Illinois law, both substantive and procedural. If they wanted a different set of advantages and disadvantages they should have chosen some other forum, or chosen none at all.”

At 611, Mustill LJ said:

“Section 1 of the Arbitration Act, 1975 requires the Court to grant a stay, unless there is no dispute between the parties, or the arbitration agreement is “null and void, inoperative or incapable of being performed.” These words do not apply here. Nothing has gone wrong with the arbitration agreement. All that has happened is that the parties have discovered that the remedies available to the arbitrator are in one respect more narrow than those which, but for the agreement, could have been awarded by the English Court. We can see no ground here for refusing a stay.

At first sight this result seems harsh but the impression is misleading. It is not a question of Clarksons being deprived of a right by the grant of a stay. On the contrary, the parties have agreed that all their rights shall be fixed in Illinois according to the procedures (and by implication the substantive law) in force in that state. If the stay is refused the consequences will be that by acting in breach of their agreement, in pursuing their claim against Howdens in the English Court, Clarksons have obtained for themselves the possibility of a right and remedy which they would not have possessed if they had acted as their agreement required. In the face of this we can see nothing unjust in holding Clarksons to their agreement, in accordance with the spirit of the Act of 1975 and the New York Convention on which it is based.”

The reasoning of Mustill LJ was followed and applied in Wealands v. CLC Contractors [1999] 2 Lloyd’s Rep 739, where the Court of Appeal held in the context of a domestic arbitration that if (as the claimant contended) the arbitrator had no power to award contribution under the Civil Liability and Contribution Act 1978 the parties had foregone the right to claim contribution against each other. Mance LJ said at para 21: -

“The philosophy of the New York Convention has been underlined, and extended to domestic arbitrations, under the 1996 Act. The reasoning in the Eras EIL actions is both binding on us and compelling in the present context. There is nothing in the 1978 Act to prevent parties foregoing by agreement any right which they might otherwise have to seek contribution. If (as the defendant, in the present forensic context, submits) an arbitrator appointed under cl. 18(1) would lack the power to award contribution, that is the consequence of the parties having agreed to submit their disputes to arbitration. It is not a reason for refusing a stay. Nor does it provide any basis for treating one aspect of their dispute, that involving any claim for contribution which the defendant wishes to pursue, as falling outside the scope of the arbitration clause or reserved to the Court.”

Attracted as I was by Lord Grabiner’s argument I cannot accept it. It seems to me that the language of clause 19.6(v) focuses more on the nature of the dispute than on the breakdown of the dispute resolution machinery. I cannot rule out that reasonable parties may have decided that, whilst they wished to have the opportunity to refer their disputes to arbitration, they were unprepared to entrust the arbitrator with certain powers, s.48 of the Arbitration Act 1996 providing an express framework against the background of which they were free to agree that the arbitral tribunal should lack the powers which they in fact enumerated in clause 19.4.3.2. That of course would not without more lead to the conclusion that the powers denied to the arbitral tribunal must of necessity be reserved to the court. However the language of clause 19.6(v) is in my judgment more consistent with an express reservation of the power of the court in this regard than it is with a saving of the power of the court in the event of failure of the dispute resolution machinery. My conclusion involves, I think, that a party could quite easily render the arbitration clause inapplicable by seeking declaratory relief. No doubt the court will be astute to exercise its case management powers and would strive to give effect to the word “genuine” as qualifying the type of dispute which is reserved to the determination of the court. Overall however I conclude that, having regard to the wording of clause 19.6(v), the parties have not by agreeing to subject their disputes to an arbitrator whom they have expressly deprived of the power to order specific performance, make declarations and grant injunctions, agreed also that those remedies should simply be unavailable. I reach this conclusion with reluctance and hesitation because it ascribes to the parties an intention which I do not regard as entirely sensible. However the parties must be the judges of what it was sensible for them to agree, circumstanced as they were in 2005, not me. On balance I have concluded that the result for which Vertex contends is more consistent with the words used to express the parties’ bargain than is the result contended for by Powergen.

I turn then to consider whether Vertex has any realistic prospect of obtaining an injunction at trial. In this regard Vertex contends that Powergen has no genuine ground for complaint about Vertex’s performance of the MSA and has merely come up with pretexts on which to claim an entitlement to terminate. Vertex suggests that Mr Elliott, who joined Powergen as Director, Customer Service and Operations only in July 2005, adopted a new customer services strategy pursuant to which Powergen would be dealing directly with its customers. The notice of termination was, submits Vertex, given simply in order to facilitate implementation of Powergen’s policy decision to take customer service activities in-house.

A substantial quantity of evidence has been placed before the court in support of the parties’ rival positions. It consists both of long and detailed witness statements and a considerable body of documentation including correspondence exchanged between the parties. I cannot hope to review it in detail here consistently with giving to the parties a reasonably prompt ruling on an application for interim relief. For the most part of course the evidence simply throws up issues which cannot be resolved at this interlocutory stage. I would however merely observe that it is not inconceivable that a new strategy may have been born out of a realisation that the existing arrangements were damaging to Powergen’s reputation and business. It is also not inconceivable that Vertex’s performance may in fact be damaging to Powergen’s reputation and business without amounting to a breach of Vertex’s contractual obligations.

This last point is I think of some significance because it by no means follows that simply because Vertex may ultimately show that Powergen enjoys no right to terminate the agreement so necessarily Powergen must be overstating the position when it says that it has lost all confidence in Vertex’s ability properly to service its customers. It is perfectly possible that the terms of the SLAs permit a level of performance which is, objectively, unsatisfactory. A nice point may arise as to the inter-relationship between Vertex’s obligation to perform with all reasonable care and skill and its obligation to comply with the Regulations and with Good Industry Practice and the level of performance called for by the SLAs, particularly in areas where the SLAs are silent. Notably the SLAs are silent in relation to important aspects of the Staywarm function, where there was to be a review and baselining exercise which, in view of the deterioration in the parties’ relationship, has not taken place. I have already indicated one aspect in which the India Services SLA fails to provide the yardstick against which an important aspect of performance can be measured.

Vertex says that belated assertions by Powergen that the relationship has irretrievably broken down lack credibility. Powergen contends that much of what Vertex has to say on this score amounts simply to pointing out that the parties have at all times and at all levels managed to remain civil towards each other. Vertex relies heavily on the decisions of the Court of Appeal in Lauritzencool AB v. Lady Navigation [2005] 2 Lloyd’s Rep 63 and Regent International Hotels (UK)Ltd v. Pageguide Ltd The Times 13^th May 1985, Court of Appeal (Civil Division) Transcript No. 164 of 1985. In the first of those cases the Court of Appeal considered the principles which should be applied in relation to an application to restrain the termination of a long-term agreement, where the practical effect of the injunction may be to compel performance of a contract which involves the provision of services and cooperation between the parties. After reviewing the authorities, Mance LJ, with whom Thomas and Judge LJJ agreed, concluded that: -

In Regent Hotels the Court of Appeal upheld a very similar order, restraining the defendant in that case from terminating a long-term contract for the management of the Dorchester Hotel.

I regard the approach of Vertex in this regard as unrealistic. The decision in Lauritzencool turned on the finding of the judge as to the workability of the time charter relationships in the event of negative injunctive relief effectively compelling the owners to leave their vessels in the Lauritzen pool. The owners in such circumstances had simply to continue to manage the vessels and to order their Masters and crew to comply with the charterers’ directions as to employment of the vessels. The discretionary element lay above all in accounting for the pool as a whole but the financial disputes between the parties and the allegations of anti-competitiveness did not touch upon the workability of the time charters themselves. Time charters are very straightforward instruments pursuant to which an owner simply agrees to employ his vessel in accordance with the directions of the charterer by means of agreeing that his Master and crew shall comply with the charterer’s directions as to employment. The relationship is a very impersonal one, requiring no further cooperation than compliance with orders by the owners and maintenance by them of the vessel in accordance with parameters agreed in the charterparty. The charterparty will spell out the nature of the orders which the charterers are entitled to give and will prescribe the ambit of the owners’ obligations as regards maintenance and other matters. Owners and charterers need never and typically will not meet. The Regent Hotels case was a case where the Court of Appeal evidently concluded that it was seriously arguable that Pageguide had no intention of performing the agreement even when entering into it. The identity of the beneficial interest behind Pageguide had been suppressed when the purchase from Regent was negotiated and completed. The day to day management and operation of the hotel rested with the Regent companies who were given autonomous and independent control over specific delegated functions. There was no need for constant supervision or cooperation – see per Ackner LJ at pp.19 – 20 of the transcript.

The Court of Appeal in the Regent Hotels case considered that there was a serious issue to be tried whether Pageguide had in fact lost confidence in the Regent companies. On the facts of that case that is hardly surprising. On the evidence before me whilst I readily accept that there are as is common ground real issues to be tried on the question whether Powergen is entitled to terminate the MSA I do not regard it as seriously in doubt that Powergen has lost confidence in Vertex. Vertex appreciated that Powergen had a low opinion of Vertex service quality before even the renegotiated April 2005 MSA was entered into. There is a dispute as to what was said at an important meeting on 14 November 2005 but a contemporary note of that meeting prepared by Mr Davis seems to me to reflect that Powergen continued to hold that view. The allegation of misuse of access to Powergen customer details and the response to it is indicative of mutual confidence having broken down. It seems to me unrealistic to contend that this loss of confidence has not filtered down to operational level. This was no doubt what Mr Coleman of Vertex had in mind when he referred to “the level of angst” caused in both organisations by the increasingly formal tone of the correspondence exchanged between them. However what is to my mind critical is that it is plain that the agreement requires extensive mutual cooperation if it is to work and there is scope for real and genuine disagreement as to what is the nature of the cooperation required from Powergen in order to enable Vertex properly to perform its obligations. I have already referred to the express terms of the agreement in that regard and to the implied terms pleaded by Vertex in its Particulars of Claim. It is a feature of the dispute that, particularly in relation to Staywarm, as reflected in the Particulars of Claim, Vertex blames its alleged inability properly to perform upon alleged failures by Powergen in rendering the necessary cooperation or on functionality deficiencies in Powergen’s own computer systems. The following passage from Powergen’s skeleton argument is I think entirely non-controversial: -

“(1)

Under the 2005 MSA, Vertex was to provide a range of services to Powergen’s customer services division, encompassing the printing and despatch of bills, statements and promotional material; handling receipt of incoming customer mail; processing and banking of all postal payments; end-to-end servicing of Staywarm customers; and a range of front and back office services from India.

(2)

Effective delivery of these services required the parties to interface with each other at a number of levels (Elliott (1) para 44). This was a matter of contractual obligation as well as practical necessity. Clause 5.3 of the 2005 MSA required Powergen to form and maintain a services team (whose members were to be notified to Vertex) for the express purpose of interfacing with Vertex’s client management team (C1/190). An equivalent reciprocal obligation was imposed upon Vertex by clause 4.4 of the 2005 MSA, which required Vertex to have regard to “the need of Powergen to maintain continuity of service from the client management team” (C1/189). Each party was required to notify the other of changes made to the composition of its operational team (clauses 4.4 and 5.3).

(3)

In addition to these managerial processes, the 2005 MSA necessitated close co-operation between the two companies in relation to computer systems and IT. Clause 5.1.7.1 of the 2005 MSA expressly required Powergen to give Vertex “access to and use of the computer hardware and software owned by Powergen” (C1/189). Pursuant to this obligation, Powergen maintained direct computer feeds between its systems in the UK and Vertex’s operations in England and India. Whether based in England or India, Vertex agents had direct access to the customer records held on Powergen’s servers in the UK (Elliott (1) para 46). This requirement to interface at a systems level has created a number of problems between Powergen and Vertex, including disputes between the parties as to the functionality of Powergen’s ICE system, Vertex’s entitlement to transfer personal data from ICE to Vertex’s own systems and the impact of the migration of customer records from Vertex’s Customer 1 system to ICE upon Vertex’s ability to perform the services under the 2005 MSA.

(4)

Constant monitoring of Vertex’s performance was required, entailing regular exchange of management information between the two companies (cf Powergen’s obligation under clause 5.1.10 of the 2005 MSA to provide such management information as might be required for contract management);

(5)

The closeness of the parties’ relationship is reflected in the Staywarm Transaction Document which refers to a requirement for “day to day operational contact” between the two organisations (C1/336) and stresses the need for “openness” between the parties in relation to the measurement and assessment of Vertex’s performance (C1/335);

(6)

The agreement contained a change procedure designed to facilitate changes to be made to the nature and scope of the services and introduce an essential element of flexibility into the parties’ arrangements (see e.g. Elliott (1) paras 149(e) and (f)). As Vertex has asserted in correspondence, in a contract of this kind there were “many hundreds of services, projects, informal requests and de facto variations ongoing at any one time” (D1/238).

(7)

Vertex’s reply evidence emphasises the close inter-action required between the operational teams, especially in relation to Staywarm. According to Vertex, this includes:

(i)

working with Powergen’s operational staff on a regular basis to monitor and manage delivery of the services provided by Vertex and Vertex’s and Powergen’s contribution to those services (Robinson para 13);

(ii)

regular meetings and communications (by email/telephone) to discuss the information and assistance that Vertex requires from Powergen in order to provide the MSA services to Powergen (Robinson para 13);

(iii)

regular meetings “to discuss the work that Vertex and Powergen are doing” (Robinson para 16);

(iv)

the operational teams speaking to each other almost every day as they “worked together on preparing training, putting reporting structures in place and otherwise setting up processes to manage the work” (Robinson para 24);

(v)

Powergen monitoring Vertex’s performance and requiring action whenever issues arise “as they inevitably will from time to time when large numbers of employees are engaged in working in various areas using complex systems and procedures” (Robinson para 25).”

Powergen also asserts that the breakdown in the relationship is clear from the following: -

“(1)

Powergen had to bring management of the backlog of Staywarm debt in-house because Vertex refused to accept responsibility for managing this debt under the 2005 MSA (Elliott (1) para 149(a));

(2)

Weekly operational and commercial review meetings have been abandoned due to the inability of the parties to progress the matters in dispute between the (Elliott (1) paras 9(h) and 149(b));

(3)

Vertex’s refusal to acknowledge and address its failings in a co-operative and constructive manner is a continuing bone of contention with the Powergen operational team (Elliott (1) para 9(i) and 149 (c));

(3)

Frequent changes to Vertex’s operational management teams (both in the UK and India) have further undermined Powergen’s confidence in Vertex’s competence (Elliott (1) para 121);

(4)

The continuing frustration felt by Powergen’s team is reflected in emails and correspondence exchanged with Vertex. For example:

(i)

Ms Dodds’ response to continued failures in Vertex’s India operation: “words fail me – and that doesn’t happen often” (D2/388)

(ii)

Mr Merrick’s response to continued failures in India: “I am at the point of complete and utter despair and am forced to seriously question the control the management in this section has over the operation” (D2/400)

(iii)

Ms Fairhall’s warning that “a number of things have reached crisis point” in India (D2/417);

(iv)

Ms Dodds’ letter of 17 October 2005 referring to Powergen’s continuing “concerns over a number of issues regarding India particularly around the voice work and the overall ability to manage the contact centre in a professional and efficient manner” (D1/223-4);

(v)

Powergen’s demand for an “extremely unprofessional” agent to be stopped from taking calls (D2/ 444-5);

I recognise that Vertex does not accept that its conduct is in these passages correctly or fairly characterised. However that there have been serious difficulties on the ground concerning the level and extent of mutual cooperation required cannot plausibly be gainsaid. Vertex’s own evidence demonstrates the range and depth of the disputes as summarised by Powergen at paragraph 39(2) of its skeleton argument as follows: -

“(2)

……. see e.g. Drury (1) para 89-91 (complaints by Vertex operational staff about adequacy of Powergen task lists and systems – allegedly not resolved); para 94 (complaints by Vertex’s operational team that it did not have the necessary information from Powergen and were ‘running blind); para 105 (inability to agree baselining for Staywarm SLAs because of the parties’ dispute over debt); paras 110-112 (further complaints about the adequacy of Powergen’s task lists); para 117 (dispute about business as usual debt and deficiencies in Powergen computer systems); para 151 (alleged failure by Powergen operational manager to provide sufficient information to Vertex about Staywarm Losses); para 155 (Vertex’s alleged inability to manage Staywarm Losses because of lack of information from Powergen); para 163 (alleged failure by Powergen to respond to operational problems concerning Staywarm); Drury (2) para 17 (dispute in relation to Staywarm debt); para 19 (breakdown in negotiations between senior management concerning Vertex’s responsibility for holding queue debt); para 29 (dispute re Staywarm Losses); para 86 (alleged caused for Vertex by the ICE migration and resultant ‘churning’ of Staywarm accounts); Robinson para 73 (Vertex had to contend with deficiencies in ICE functionality and lack of reporting and management information from Powergen).”

So far as concerns collection of Staywarm debt Vertex appears to accept no contractual responsibility at all unless and until the relevant SLAs are put in place. Paragraph 11.4 of its Particulars of Claim reads: -

“In any event, it is denied (if it is intended to allege) that there was any breach of any express obligation under the Staywarm TD in respect of the collection of debts, as there were no agreed SLAs in respect thereof, and it is denied (if it be alleged) that there was any implied obligation upon the Claimant under the Staywarm TD to use reasonable care and skill in the performance of its obligations thereunder.”

In these circumstances I do not consider that it is appropriate to grant injunctive relief which will have the effect of compelling the parties to work together. Nor do I consider that the terms of the contract are sufficiently precisely defined to indicate to Powergen precisely what is required of it if it is not to prevent or hinder Vertex from performing its functions under the MSA. In this regard I derive considerable guidance from the decision of the House of Lords in Co-Operative Insurance Society Limited v. Argyll Stores (Holdings) Ltd [1998] AC 1. As Lord Hoffmann pointed out, at page 17, the question of certainty must be decided on the assumption that the court might have to enforce the order according to its terms. I note also the distinction drawn by Lord Hoffmann at page 13 between orders which require a defendant to carry on an activity, such as running a business over a more or less extended period of time, and orders which require him to achieve a result. The present case cannot in my judgment be characterised as one in which Powergen would simply be enjoined to bring about a result. Furthermore I do not myself regard it as an argument in favour of injunctive relief that the parties have so far been able by agreement to hold the ring pending determination of this application. There is a world of difference between pragmatic compromise and performance enjoined by order of the court under pain of all the sanctions available for contempt. Given that the parties are agreed that the trial of this matter would occupy of the order of three to four weeks of court time, and given the evidence which would have to be marshalled therefor, it is unlikely that a trial could realistically take place before next year and the court could not in any event easily accommodate it before the end of January 2007. There has already been dispute and uncertainty as to what is required of both sides in order to make the arrangements work. In the light of the history it would in my judgment impose an intolerable burden upon the employees of Powergen simply to expect them to make the arrangements work in circumstances where it would be unclear to them whether they were in fact doing all that was required if sanctions were to be avoided. Whilst I accept in the spirit in which it was meant Mr Mill’s assurance that his clients would not be astute to hurry back to court to allege that Powergen was in contempt, given the complexity and extent of the cooperation required of Powergen if Vertex is to be able properly to perform this would be a situation in which, as envisaged by Lord Hoffmann at page 17 of his speech in the Co-operative Insurance case, the injunction would only work if no one inquired too closely into what it requires of Powergen. Such an order should not be made and I decline to make it.

This conclusion renders it unnecessary for me to consider the balance of convenience. At the outset of his written submissions on this point Mr Mill refers to the following well-known passage in the judgment of Sachs LJ in Evans Marshall and Co v. Bertola SA [1973] 1WLR 349 at p.379: -

“The standard question in relation to the grant of an injunction, “Are damages an adequate remedy?”, might perhaps, in the light of the authorities of recent years, be rewritten: “Is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?”

To this citation I would add the following passage from the dissenting judgment of Millett LJ in the Co-operative Insurance case, [1996] Ch. 286 at p.305: -

“The equitable jurisdiction should not be exercised in a manner which would defeat the commercial expectations of the parties at the time when they entered into their contractual obligations.”

This passage must I think be regarded as having received the implicit approval of the House of Lords where Lord Hoffmann speaks, at page 15 of the report, of the purpose of the law being to satisfy the expectations of the party entitled to performance. These sophisticated parties included in their contract clause 11 which excludes liability for loss of profit, loss of contract and loss of goodwill and imposes a cap on each party’s liability in the aggregate sum of £12 million. Of course there will be issues as to the proper construction and applicability of these provisions and Vertex also contends, somewhat implausibly as it seems to me, that they are unfair and as such unenforceable. However that may be, it is not immediately obvious to me that it would be unjust for Vertex to be confined to such remedy in damages as is determined to be the extent of the bargain which it struck. In view of my earlier conclusion I do not need to grapple with the question what is the precise ambit and extent of the decision of the Court of Appeal in Bath and North East Somerset District Council v. Mowlem plc [2004] BLR 153. That was an extraordinary case on the facts where the contractor, Mowlem, sought indefinitely to delay completion of the high profile Millennium Bath Spa project, a project which was intended and expected to confer significant benefits upon the local economy. At paragraph 15 of his judgment Mance LJ said, in relation to that contract: -

“The agreement on liquidated and ascertained damages is not an agreed price to permit Mowlem [to breach its contract], and it does not preclude the court granting any other relief that may be appropriate.”

I have already concluded that other relief is not here appropriate and I do not have to decide whether the approach of the Court of Appeal in that case precludes the court from concluding in this that it is not unjust that Vertex should be confined to its remedy in damages.

Vertex alleges that it will suffer loss, particularly reputational loss, of a character which cannot be precisely ascertained and cannot be adequately compensated in money. I can understand that a determination that Powergen is entitled to terminate the MSA will have a negative impact upon Vertex’s ability successfully to compete for new business. However I have difficulty in following how the grant or refusal of an interim injunction will make any real difference in this regard. I should have thought that the damage is effectively already done. It is Vertex’s case that in bids for work in the public sector Vertex is obliged to disclose any contract which has been terminated for cause. It produces by way of example the form of application for inclusion on Birmingham City Council’s Select Tender List (C2/545). That form asks, at Section E, under the rubric Contract Performance: -

“Have any of the following circumstances occurred on any contract involving your firm during the last 3 years:

•

A financial deduction or liquidated damages imposed;

•

A contract terminated or your employment determined (terminated);

•

A contract not renewed for failure to perform to the terms of the contract;

•

Withdrawal from a contract prematurely;

•

Outstanding claims or litigation against your company?

If yes, please provide full details on a separate sheet.”

As I understood it the suggestion was made that, if an interim injunction were granted preventing Powergen from acting on its notice of termination, this would enable Vertex between now and the trial to complete forms such as this without reference to its dispute with Powergen. I need only say that I find that a surprising suggestion. It may be that Vertex relies upon Powergen as a “key reference client” when bidding for outsourcing work but I do not consider that it formed a part of the commercial expectation of either Vertex or Powergen when entering into the contract that the Court would lean in favour of granting injunctive relief to Vertex so that Vertex could use its relationship with Powergen as a marketing tool.

When assessing the potential damage to Powergen in the event that an injunction is granted and it is subsequently held that Powergen had in fact been entitled to terminate it is in my judgment worth bearing in mind that Powergen would by an injunction be prevented from dealing directly with its customers in a manner in which it says it wishes to do. It is well known, and the evidence bears out, that competition in the utilities provision field is increasingly intense. It is obvious, and the evidence again bears out, that a key determinant in customer loyalty is the manner in which utilities providers deal with complaints and enquiries. A higher standard is these days expected, and is imposed by regulation, than was perhaps sometimes tolerated in the days of monopoly provision. It would to my mind be a bold step to prevent Powergen from dealing with its customers as it wishes in circumstances where it plausibly asserts that the current arrangements adversely affect its reputation as an utilities provider.

It follows from the foregoing that I am by no means satisfied that the balance of convenience so strongly favours the grant of an interim injunction as Vertex contends. I recognise that my tentative conclusion in that regard is coloured by my belief that this is a situation in which injunctive relief is simply inappropriate and unworkable. In those circumstances it is no doubt better that I should express no concluded view upon a hypothesis which does not, in my judgment, arise.