WPP Holdings Italy Srl & Ors v Benatti

This is an application challenging the jurisdiction of the court over proceedings brought against Mr Marco Benatti by WPP Holdings Italy Srl (“WPP Italy”), WPP 2005 Limited (“WPP 2005”) and Berkeley Square Holding BV (“BSH”).

Mr Benatti is an Italian national, domiciled in Italy. He is a successful businessman who by about 1997 had acquired numerous interests in companies in Italy active in the worlds of market research, advertising and media buying, including CIA Group plc (later renamed Tempus Group plc) and Inferentia-DNM Italia SpA .

WPP Italy is incorporated in Italy and is a subsidiary in the WPP group of companies which carries on business in the worlds of advertising, media buying, planning and public relations. WPP 2005 used to be called WPP Group plc (“WPP Group”) but in October 2005 it swapped names with another WPP company, WPP 2005 Limited. BSH is incorporated in the Netherlands; it is another WPP company.

In February 2002 Mr Benatti entered into a written contract (“the Agreement”), the counterparty to which was WPP Italy. Under the Agreement Mr Benatti was appointed “as a consultant” of WPP Italy and WPP Group (now named WPP 2005) for an initial period of three years after which there could be termination on 12 months’ notice. Clause 3.2 permitted Mr Benatti to have an interest in businesses not forming part of the WPP group and there were listed in Schedule 2 almost 80 companies which Mr Benatti represented to be all those in which he had an interest. By clause 3.2 Mr Benatti undertook “in good faith to keep the Chief Executive informed of his business activities which are not concerned with [WPP Italy], [WPP 2005] or any Group Company.”

Clause 11 provided that the Agreement was governed by English law and any controversies arising from or related to the interpretation or enforcement of the Agreement were to be exclusively submitted to the Courts of England.

On 9^th January 2006 WPP Italy summarily terminated the Agreement. The claimants contend that this was because Mr Benatti had failed to disclose his interest in two Italian companies, Media Club SA (“Media Club”) and Outdoor Visual Touch Srl (“OVT”).

Media Club, an independent Italian media buying and planning agency, was acquired by the WPP group on 11 November 2002 under an agreement (“the MCSA”) whereby Media Club’s share capital was purchased by BSH from Callia Trading Investimentos Lda (“Callia”), Maria Letizia Zicolillo and Adriano Corbella for a fixed payment of €20,658,276, to be followed by three “earn-out” payments dependent on the profits of Media Club for the years 2001 to 2006. BSH made the first of these payments on 24 February 2003 in the sum of €2,073,229.00 and Mr Benatti was paid a 1% commission totalling €206,582 on 10 February 2003, this sum being paid by BSH to Blugroup.

Following the MCSA the operations of Media Club and another WPP entity, mediaedge:cia Italy Holdings SpA were combined to form a merged media buying and planning operation, mediaedge:cia Italy/Media Club. It was also agreed between Sir Martin Sorrell, WPP Group’s CEO, and Mr Benatti that Mr Benatti should have a share in the profits of this merged entity just as he had in another WPP media buying and planning entity, Mindshare Italia SpA (“Mindshare Italy”). The thinking was that if Mr Benatti had a share in the profits in mediaedge:cia Italy/Media Club as well as in Mindshare Italy he would have no incentive to prefer one company over the other. A contract (“the Royalty contract”) between BSH and Royalty Marketing e Investimentos Lda (“Royalty”) was accordingly executed, the effect of which was to give Royalty (a Madeiran company owned by Mr Benatti) a 22.5% share in the increased profitability of the merged mediaedge:cia Italy/Media Club business.

Mr Benatti first suggested that WPP Group should consider acquiring Media Club in 1999, before the Agreement was concluded. During the ensuing negotiations and due diligence it was represented to WPP Group that Media Club was owned and run by four of its employees, Mr Maino, Mr Salvaderi, Mr Corbella and Ms Zicolillo, and it was said that Mr Maino’s and Mr Salvaderi’s interests were held through Callia, a Madeiran company. Media Club was not included in the list of companies set out in Schedule 2 to the Agreement and it is alleged that at no stage did Mr Benatti inform Sir Martin Sorrell, or anyone else from WPP Group, that he had an interest in that company.

Witnesses for the claimants state that in November 2005 Mr Benatti told WPP Group that the second earn-out payment would be in the region of €8.9 million, whereas WPP Group had estimated that it would be about €300,000. Mr Benatti sought to justify his estimate on the basis that the sellers of Media Club’s share capital were entitled to off-set certain tax losses against profits in calculating the earn-out. He also argued that such a large payment was needed to incentivise Mr Salvaderi. At around this time Deloitte, who were auditing the figures on which the earn-out was to be based, drew to Sir Martin Sorrell’s attention what they regarded to be a suspicious transaction involving the sale by Media Club to Banca IFIS of a receivable owed to Media Club by OVT, a company that was in liquidation. In the light of this information an investigation was undertaken by the WPP group into Mr Benatti’s interest in the acquisition of Media Club and the sale of the OVT receivable.

Sir Martin Sorrell says in his first witness statement that at the meeting he had with Mr Benatti on 9 January 2006 when the Agreement was terminated and at a subsequent meeting on 20 January 2006 Mr Benatti admitted that he had interests in both Media Club and OVT. Sir Martin says that Mr Benatti’s admission was later confirmed by Mr Marco Girelli, the Vice President of Media Club and Chairman of FullSix SpA and Mr Gianni Bossi, the Chairman of WPP Italy, who is also Chairman of Banca IFIS and a long standing financial adviser to Mr Benatti. Sir Martin further states that Messrs. Salvaderi, Maffei and Rossotto, the latter being Mr Benatti’s lawyer, also confirmed the failure properly to disclose the true ownership of Media Club.

Mr Benatti says that the allegations made against him are untrue and without substance; he absolutely denies any wrong doing. Acting on legal advice he has not set out his side of the story since the hearing before me is not the trial of the action. He accepts that the claims made against him by WPP Italy constitute serious issues to be tried.

On 11 January 2006 WPP Italy issued a Claim Form in the Queen’s Bench Division against Mr Benatti claiming damages for breach of the Agreement, and declarations that: (i) the relationship between WPP Italy and Mr Benatti was not one of employer/employee; and (ii) Mr Benatti remained bound by post-termination covenants contained in clauses 6 and 8 of the Agreement. WPP Italy took the view that the court had jurisdiction over the claim under Article 23 of Council Regulation (EC) No 44/2001 (“the Judgments Regulation”). However, by mistake the Claim Form had inserted into it the wrong endorsement required by para 3.5A of the CPR Part 7 Practice Direction. Instead of referring to the Judgments Regulation it referred to the Brussels Convention.

On 1^st February 2006 Mr Benatti commenced proceedings in the Tribunal of Verona against WPP Italy and “WPP Group plc” seeking damages and declarations that: (i) he was an employee of those companies; (ii) he was not in breach of the Agreement; and (iii) the Agreement had been unlawfully terminated. Proceedings were brought against “WPP Group plc” because Mr Benatti and his Italian lawyers were unaware of the change of name from WPP Group plc to WPP 2005 Limited that had occurred in October 2005.

On 15 February 2006, Master Fontaine, on WPP Italy’s application without notice to Mr Benatti, made an order (“the joinder order”) joining WPP 2005 and BSH to the proceedings issued on 11 January 2006. The Master ordered that a sealed copy of the joinder order be served on Mr Benatti by 22 February 2006, but neither the order nor the application notice has ever been served in compliance with this order.

Pursuant to the joinder order on 15 February 2006 the claimants issued an Amended Claim Form which was served on Mr Benatti in Italy on 18 February 2006, together with Particulars of Claim. The Particulars of Claim allege Mr Benatti: (i) did not disclose a conflicting personal interest in Media Club and thereby made a secret benefit when that company was acquired; (ii) failed to disclose his conflicting personal interest in OVT and thereby made a secret profit; and (iii) circumvented budgetary restrictions on WPP Italy by causing various WPP group companies to enter into contracts with third parties, some of which were not in the interests of WPP Italy and from some of which Mr Benatti obtained a personal benefit.

WPP Italy claims damages for breach of the Agreement and also an account of profits and equitable compensation on the basis that Mr Benatti acted in breach of fiduciary duty. WPP Italy also seeks declarations that: (i) it was entitled summarily to terminate the Agreement; (ii) the Agreement was not an employment contract; (iii) the restrictive covenants contained in the Agreement are binding on Mr Benatti; and (iv) Mr Benatti holds any secret profit made in breach of the restrictive covenants on trust for WPP Italy.

WPP 2005 and BSH claim that they are entitled to sue Mr Benatti for breach of the Agreement and also that he owed them the obligations of a fiduciary and accordingly is liable in equity for allowing his personal undisclosed interest to conflict with his fiduciary duties.

On 16 February 2006 (and prior to discovering that the Amended Claim Form had been issued) Mr Benatti commenced a second set of proceedings in the Tribunal of Verona against WPP Italy, WPP Group and Sir Martin Sorrell for damages for defamatory statements in which it was alleged that Mr Benatti had made secret profits and for a declaration that Mr Benatti had not acted in breach of the Agreement.

On 30 March 2006 Mr Benatti commenced a third set of proceedings, this time in the Tribunal of Milan and against BSH alone claiming, inter alia, damages for defamation and a declaration that Mr Benatti had no contractual relationship with BSH and is not liable to BSH in the English proceedings on any basis.

On 1 March 2006 Mr Benatti commenced a fourth set of proceedings, this time in the Corte di Cassazione against WPP Italy, WPP 2005 and Sir Martin Sorrell seeking a ruling that the Italian courts have jurisdiction under the Judgments Regulation over the first two sets of proceedings commenced in the Verona Tribunal.

Articles 5 (1), 5 (3), 18 to 21, 23, 27 and 30 of the Judgments Regulation provide:

The claimants contend that their claims were made in England before any of Mr Benatti’s claims were made in Italy and that the courts of England have jurisdiction in respect of all of their claims on the basis of Article 23. In the case of WPP 2005 and BSH, this contention is founded on an argument that these claimants are entitled to enforce the Agreement under the Contracts (Rights of Third Parties) Act 1999 (“the 1999 Act”). In the alternative, the claimants contend that the English Court has jurisdiction over their claims for breach of fiduciary duty under Article 5 (1), alternatively Article 5 (3), of the Judgments Regulation.

Mr Benatti argues that the Italian courts in which the first three sets of Italian proceedings were commenced were seised of the matters in dispute between the parties before the English courts were seised of those matters. He further argues that jurisdiction to sue him in England cannot be founded on the exclusive jurisdiction clause in the Agreement because that agreement is “an individual employment contract” for the purposes of Section 5 of the Judgments Regulation, with the result that all the claims brought by the claimants must be brought in the courts of his domicile, Italy. In addition, he submits that Articles 5 (1) and 5 (3) of the Judgments Regulation do not confer jurisdiction on the English courts over the breach of fiduciary duty claims.

The effect of Article 27 (1) is that if the Italian courts are the courts first seised of the claims made by the parties, the English court must not determine whether it has jurisdiction over those proceedings but instead must stay them. Accordingly, the first issue I must determine is whether the English court is the court first seised of the claimants’ claims. For the reasons given in paragraphs 54 to 61 below I proceed on the basis that the burden of proof is on Mr Benatti and the standard of proof is a good arguable case in the sense of a much better argument than the other side on the material available.

Mr Chambers for Mr Benatti submitted that the Claim Form and Amended Claim Form were not documents “instituting the proceedings” for the purposes of Article 30 (1) because: (i) they did not identify each claim made against Mr Benatti; (ii) they did not carry the correct endorsement; and (iii) in respect of the Amended Claim Form, the claimants had failed: (a) to give notice of their application for the joinder order; (b) to serve a copy of the joinder order; and (c) to include in the Particulars of Claim any jurisdiction endorsement at all.

Mr Chambers contended that the “document instituting the proceedings” must bear the correct endorsement as required by para 3.5A of the CPR Part 7 Practice Direction and must also be sufficiently detailed to allow the cause of action being asserted to be identified, otherwise the determination of which court is first seised under Article 27 could not be undertaken. He pointed out that the endorsement inserted into the Claim Form not only related to the Brussels Convention rather than the Judgments Regulation, but also it referred only to an agreement conferring jurisdiction and not to the additional grounds for asserting jurisdiction now relied on by the claimants for the breach of fiduciary duty claims. In Mr Chambers’ submission the claimants’ procedural failures invalidated the issue and the service of the Claim Form as a matter of domestic procedure and even if this were not the case, the requirements of Article 30 (1) had not been satisfied.

I cannot accept Mr Chambers’ submissions. In my judgement, it is plain that the question whether proceedings have been instituted by a document for the purposes of Article 30 (1) is a question to be determined by the national law of the state where it is said the proceedings were begun. And in English law, there is no doubt that proceedings are started when the court issues a Claim Form at the request of the claimant, see CPR 7.2. I would also observe that the application of English law in determining whether English proceedings have been instituted by the issue of a Claim Form will not frustrate the operation of Article 27 since the question whether the court should stay its own proceedings under that Article can only arise after Particulars of Claim have been served. This is because under CPR 11 (2) a defendant who wants to dispute the court’s jurisdiction must first file an Acknowledgement of Service under CPR 10 and under that rule, the period for filing an Acknowledgement of Service begins after service of the Particulars of Claim, if these are served separately from the Claim Form.

I am also of the view that the procedural failures alleged against the claimants are not such that under CPR 3.10 the court would invalidate the steps taken by the claimants. It is true the wrong endorsement was inserted into the Claim Form and Amended Claim Form, but the endorsement that did appear signalled that the claimants were basing jurisdiction on an agreed jurisdiction clause. It is also true that the Particulars of Claim contained no endorsement at all but they were served in connection with the Amended Claim Form whose endorsement made clear, as I have said, the basis on which jurisdiction was being asserted.

Nor do I think that the failure to include in the endorsement a reference to Articles 5 (1) and 5 (3) is any reason for invalidating the proceedings brought by the claimants. These jurisdiction grounds are relevant only to the breach of fiduciary duty claims and are very much an alternative long stop to the primary ground relied on, namely an agreed jurisdiction clause in the form of clause 11 in the Agreement. The claimants’ failure to serve a sealed copy of the joinder order and a copy of the application leading to that order are also not so serious that they should be held to invalidate the issuance and service of the English proceedings. The Amended Claim Form states that it was amended pursuant to order of Master Fontaine dated 15 February 2006 and it was to be easily inferred that that order had been applied for. Further, it is not suggested by Mr Chambers that Mr Benatti has been materially prejudiced in any way by the claimants’ failure to serve on them the order or the application notice.

It is common ground that the English proceedings have been duly served on Mr Benatti in Italy. Accordingly, I hold that the English court became seised of the claims made by WPP Italy for breach of the Agreement on 11 January 2006 and of the claimants’ claims for breach of fiduciary duty on 15 February 2006. No Italian proceedings at all had been commenced by 11 January 2006 and proceedings in Italy against BSH were only commenced on 30 March 2006. It follows that as between the courts of Italy and England, the courts of England were first seised of the causes of action in issue between Mr Benatti of the one part and WPP Italy and BSH of the other.

It remains to consider which state’s courts, Italy’s or the UK’s, were first seised of the causes of action in issue between Mr Benatti and WPP 2005, it being common ground that the identity of the parties and the causes of action and the object of both sets of proceedings are the same.

In Italy the originating document has to be served before it is lodged with the court. It is therefore Article 30 (2) of the Judgments Regulation which determines when the Italian courts became seised of the WPP 2005 claims.

The writ setting out Mr Benatti’s claim against WPP Italy and “WPP Group plc” was handed to the authority responsible for service, UNEP, on 1 February 2006. The writ referred to “WPP Group plc” because neither Mr Benatti nor his lawyers knew that the company formerly known by that name had swapped names with a company called WPP 2005 Limited in October 2005. However, when giving details of the parties sued, the writ correctly specified WPP 2005’s registration number. It was also stated in the writ that: (a) since the beginning of 2002 Mr Benatti had been involved in a working relation with WPP Group plc and its Italian group represented worldwide by Mr Martin Sorrell; (b) Mr Benatti had been appointed as Country Manager of WPP Group plc under the Agreement; and (b) as Country Manager of WPP Mr Benatti was subject to the direction of WPP Group plc’s CEO.

An officer of UNEP signed a declaration (the “relata di notifica”) which stated that at the request of Mr Benatti’s lawyer he had served a copy of the writ “to WPP Group plc in the person of its actual legal representatives, at the legal offices of the company in 27 Farm Street, London WIJ 5RJ (UK), in accordance to article 14 of the CE regulation no. 1348/2000 by means of registered mail with advice of receipt.”

WPP Group plc and WPP 2005 both have a presence at 27 Farm Street, London. When the writ arrived there a receptionist signed a Posteitaliane pro-forma receipt which arrived back in Verona on 22 February 2006 and was lodged with the court. However, no attempt was made to serve a translation of the writ at the time the writ was served.

Mr Smouha QC for the claimants submits that Article 30 (2) requires that the authority responsible for service receiving the document must be instructed to serve it on the entity sought to be sued. He further submits that the document must subsequently be served on that entity in accordance with Council Regulation (EC) No 1348/2000 (“the Service Regulation”). Those requirements, says Mr Smouha, were not met in this case because UNEP was instructed to serve the document on WPP Group plc which is a separate entity from the party sought to be sued and if any entity was served it was WPP Group plc and not WPP 2005. In any event, there was in fact no effective service on anyone under the Service Regulation because a UK addressee may refuse to accept service if the principal document is not accompanied by a certified translation.

Mr Smouha’s submissions founded on the misnaming of WPP 2005 are decidedly technical since the mistake made by Mr Benatti and his lawyers, Professor Avvocato Claudio Consolo and Avvocato Marco Mamoli, was a perfectly understandable one in the circumstances and once the writ is looked at, albeit with the benefit of a translation, it is perfectly plain that the intended party is WPP 2005.

Article 30 (2) is to be read with Article 30 (1). In my view this means that “the document” in Article 30 (2) means the document instituting proceedings or an equivalent document. Mr Chambers submitted that it is the national law where the document is issued and received for service that determines whether the document constitutes a document instituting proceedings against the intended defendant and whether as such it is received by the authority responsible for service on the intended defendant.

In my opinion Mr Chambers’ submission is correct. Each side put in witness statements from Italian lawyers stating how in their view the Italian courts would rule on an application in domestic proceedings for the mistake made by Mr Benatti and his lawyers to be retrospectively cured. On behalf of Mr Benatti, Avvocato Mamoli cited three decisions of the Corte di Cassazione (3 August 1988, n.4815; 8 April 1998, n.3638; and 14 June 1999, n. 5897) to support the proposition that not only a simple change of name of a company but also a transformation of the type of corporation will not affect legal proceedings brought against the company. In his view, these authorities showed that the misnaming of WPP 2005 would be retrospectively curable in Italian law.

Professor Avvocato Antonio Briguglio, who holds the Chair of Civil Procedural Law at the University of Rome “Tor Vergata”, disagreed with Avvocato Mamoli. In his first statement he explains that Italian law distinguishes between defects in service that render service null and void and defects that render service non-existent. Defects of the first sort are curable; defects of the second sort are not. He goes on to say that the authorities relied on by Avvocato Mamoli are not pertinent because they dealt with a situation where there was only one entity whereas here there are two, WPP 2005 and WPP Group plc. He states that service is non-existent when it is: (i) rendered to an entity which is different to the addressee; (ii) and that entity does not have a relationship which would entitle it to receive service on behalf of the addressee. Accordingly, in his opinion the service effected in the instant case was non-existent service and could not be cured.

Professor Consolo in his fourth witness statement is strongly of the view that Professor Briguglio’s second condition for service to be non-existent is not supported by the authorities. He says that in the authority relied on by Professor Briguglio the court stated that where in practice a link can be traced between the place and recipient of the notice and the actual addressee, although the rules governing service have been breached, such notice cannot be non-existent but is void and curable.

Professor Consolo cites Article 160 of the Italian CPR which provides that if the document has served its intended purpose, service will not be declared to be a nullity. And in paragraph 14 of his fourth statement, Professor Consolo says:

None of the Italian lawyers was cross-examined, the hearing being an interlocutory application. I must therefore come to a view on what is said in the witness statements. With respect to Professor Briguglio, I find on the evidence presented to me by Professor Consolo that under Italian law the misnaming of WPP 2005 in the writ and the relata di notifica is a curable defect which once cured would leave unaffected the date the writ was received by UNEP.

I accordingly reject Mr Smouha’s submission that the Italian courts were not first seised of the first set of Italian proceedings on 1 February 2006 because of the misnaming of WPP 2005 in the writ and relata di notifica.

I turn next to Mr Smouha’s submission based on the failure to serve a certified translation of the writ at the time the writ was served.

The method of service adopted by Mr Benatti was not the centralised mechanism contemplated in Chapter II, Section 1 of the Service Regulation (Articles 4 to 11) but transmission by post, which is governed by Article 14 in Section 2.

Article 14 provides:

In respect of service by post the UK has specified:

Article 8 (1) of the Service Regulation reads:

Mr Chambers submits that Article 30 (2) of the Judgments Regulation is not concerned with service of the originating document on the defendant, only with receipt of the originating document by the authority responsible for service. In the alternative he argues that service by post in the UK is only defective for want of a translation if the addressee refuses to accept service for this reason, and WPP 2005 never gave the lack of a translation as a reason for refusing to accept service. In the further alternative, he relies on Leffler v Berlin Chemie AG [2006] I.L.Pr. 88 where the ECJ held that a failure to provide a translation of the document as required by Article 8 could be remedied by the sender of the document sending the translation requested by the rejecting addressee. In Mr Chambers’ submission it matters not that the decision in Leffler was concerned with the construction of Article 8 (the method of service in that case being the centralised mechanism covered by Section 1 and not post covered by Article 14). In his submission, by reason of paragraph 1 of the first update of information communicated by Member States under Article 23 of the Service Regulation (OJ C 202 18^th July 2001), Article 8 was extended to Article 14 and thus Leffler applies to the instant case.

I reject all three of Mr Chambers’ submissions. In my judgement it is implicit in Article 30 (2) that for the receipt of the document by the authority responsible for service to be the time the court is first seised of the proceedings the document must, post receipt, be served in compliance with the Service Regulation. As to Mr Chambers’ second submission, WPP 2005 has never accepted service of the writ in the first set of Italian proceedings and in my judgement they are entitled in this application to give as a ground for not doing so the failure to serve a translation. Turning to Mr Chambers’ third submission, paragraph 1 of the first update reads:

In my opinion this paragraph applies only to the situation it expressly addresses and does not render Article 8 applicable where a Member State has communicated specific language requirements under Article 14. If it had been intended to cut down further the liberty conferred on Member States by Article 14 (2) to specify the conditions under which they will accept service by post it would have said so. Since Leffler was undoubtedly decided on the basis that Article 8 applied to the method of service adopted and since, as I have held, Article 8 only applies to service by post under Article 14 if a Member State has not communicated specific language requirements, Leffler cannot assist Mr Benatti. The writ in the first set of Italian proceedings was therefore not served in accordance with the Service Regulation and it follows that the Italian courts were not first seised of the causes of action asserted by and against WPP 2005.

The first question I have to deal with is: on whom is the burden of proof? It is common ground that this issue falls to be determined by the applicable national law of the UK. Mr Smouha submits that it is plain that WPP Italy satisfies the requirements of Article 23 (1) and in these circumstances the burden is on Mr Benatti to establish that the Agreement is an individual contract of employment for the purposes of Section 5 of the Judgments Regulation. He contends that Article 23 (5) is not in the nature of a pre-condition to establishing an agreed jurisdiction clause under Article 23 (1); it is not the substantive provision by which an otherwise valid exclusive clause is dis-applied; rather, it is of the nature of a “for the avoidance of doubt” provision. Accordingly, Mr Benatti should be viewed as relying on an exception contained in an instrument akin to a statute, and the general rule that he who relies on a statutory exception has the burden of proving it should apply. Mr Smouha relied on the obiter observations of Rix LJ in Konkola Copper Mines plc v Coromin Ltd [2006] 1 Lloyds’ Rep 410 at 428. There, jurisdiction in England over each of the defendant and Part 20 reinsurers was established under Article 2 and in some cases Article 6 of the Lugano Convention and the Part 20 defendants were seeking to displace this jurisdictional basis by relying on a jurisdiction clause contained in what they said was the governing reinsurance contract. The Court of Appeal heard argument both on the standard of proof and the connected issue of burden of proof but declined to determine these issues since it was unnecessary to do so. However, having referred to the decisions of Steel J at first instance in Knauf UK GmbH v British Gypsum Ltd [2002] 1 WLR 907 (CA); Lawrence Collins J in Bank of Tokyo-Mitsubishi Ltd v Baskan Gida Sanayi ve Pazarlama AS [2004] 2 Lloyds’ Rep 395; and Mr Richard Siberry QC in Carnoustie Universal SA v ITWF [2003] ILPr 82, Rix LJ set out in some detail his conclusions on the burden of proof and standard of proof:

Mr Chambers accepts that clause 11 satisfies the requirements of Article 23 (1) but argues that Article 23 (5), referring as it does to Article 21, should be construed as establishing a precondition to the application of Article 23 (1), namely, that the party seeking to rely on a jurisdiction clause must not only satisfy the requirements of Article of 23 (1) but also show that the clause is not contained in an individual contract of employment.

In my judgement, Mr Smouha is correct on the burden of proof issue. WPP Italy having established that clause 11 satisfies the requirements of Article 23 (1), the burden is on Mr Benatti to prove that the “trumping” provisions of Section 5 apply. It is not for WPP Italy to prove the negative that the Agreement is not an individual contract of employment.

This too is an issue to be decided by English law, see Shevill v Presse Alliance [1995] ECR 1-415.

In para 94 in Konkola Rix LJ observed:

The “Canada Trust gloss” is Waller LJ’s formulation of the test in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547, “that one side has a much better argument on the material available”.

In both Canada Trust and Konkola the Court of Appeal said that where a jurisdiction issue will also be an issue going to the merits at the trial, the court hearing a jurisdiction challenge must be careful not even to give the appearance of pre-trying that issue. Indeed, in Konkola, Rix LJ was of the view that where the power to give leave to serve out of the jurisdiction is a discretionary one (which is not the case here) the Canada Trust gloss was inappropriate: it was enough for the judge to decide if there was a good arguable case simply by taking account of the opposing arguments (para 81). In the instant case the Article 23 jurisdiction issue is closely connected with an issue in the English and Italian proceedings since in the English proceedings WPP Italy seeks a declaration that the Agreement was a consultancy agreement and not a contract of employment and in the latter proceedings Mr Benatti seeks a declaration to the opposite effect. This issue is not however identical to the issue at trial as to the status of the Agreement since the jurisdiction issue involves an autonomous concept governed by the law of the Judgments Regulation, whereas the issues at trial will be determined by English law and possibly, in the case of the Italian proceedings, by certain mandatory provisions of Italian law depending on a contention based on Article 6 (1) of the Rome Convention.

Since each side, consistently with their respective contentions that the other side has the burden of proof, submits that the standard of proof is the Canada Trust gloss, I have decided that that is the standard I should apply. In the circumstances, I trust that any domestic court that comes to try the claims made by the parties will understand that I am not attempting in any way to pre-empt its process.

So far I have been dealing with the dispute between the parties as to whether Article 23 founds jurisdiction for the claimants’ claims. In my opinion, the claimants having established that clause 11 satisfies the requirements of Article 23 (1) and shown that the proceedings brought in England on 11 January 2006 were brought before any proceedings were commenced in Italy, the burden of proving which state’s courts were first seised of the proceedings is on Mr Benatti. I am also of the view that the standard of proof applicable to the first seised issue is the Canada Trust gloss, particularly since this issue is quite unconnected with the issues on the merits that will be determined at trial.

It is common ground that the words “individual contract(s) of employment” in Article 18 (1) and (2) of the Judgment Regulation are to be interpreted autonomously and in light of Recital 13 to the Judgments Regulation which reads:

To date the ECJ has not pronounced on the meaning of “an individual employment contract” in the context of Section 5 of the Judgments Regulation but it has had to deal with the concept of an employment contract in other autonomous contexts, particularly Article 5 (1) of the Brussels Convention. In Ivenel v Schwab [1982] ECJ 1891 the question was whether under Article 5 (1) of the Brussels Convention the place where an obligation under a contract of employment was to be performed was to be determined by the nature of the contract. In paragraphs 14 to 17 of the judgement the ECJ said:

In Schenavai v Kreischer [1987] ECR 239 the question was how Article 5 (1) applied to a claim brought by an architect for recovery of fees said to be due under an oral commission for the construction of three holiday homes. The court distinguished contracts of employment from the contract sued on as follows:

The particularities of an employment contract identified in Shenavai were re-affirmed in Six Constructions v Humbert [1989] ECR 341 and Mulox IBC Ltd v Geels [1993] ECJ I-4075, both of which were concerned with the application of Article 5 (1) of the Brussels Convention.

In Lawrie-Blum v Land Baden-Wurttemberg [1986] ECR 2121 the question was whether a trainee teacher was “a worker” for the purposes of Article 48 (1) of the EEC Treaty (free movement of persons). At paragraph 17 of the judgement, the ECJ said:

The ECJ repeated this definition of the essential feature of an employment relationship in Brown v Secretary of State for Scotland [1988] ECR 3205 (para 21) and Bernini v Minister van Onderwijs en Wetenschappen [1992] ECR 1-1071 (para 14).

I take from these decisions that the objective criteria of an employment contract for the purposes of Section 5 of the Judgments Regulation are: (i) the provision of services by one party over a period of time for which remuneration is paid; (ii) control and direction over the provision of the services by the counterparty; and (iii) integration to some extent of the provider of the services within the organizational framework of the counterparty. In applying these broad criteria I think regard must be had particularly to the terms of the contract; the conduct of the parties is relevant too. Further, in recognition of the fact that the exercise is one of fact and degree and quite different relationships may share to a considerable extent some of the criteria, the court should use as reference points a paradigm of a contract of employment (eg a contract under which a clerk works full time in an office) and a paradigm of a contract for services (eg contract under which an architect agrees to design a number of houses as in Shenavai). The court should also keep in mind the underlying policy of Section 5 --- the protection of parties to a contract who are weaker from a socio-economic point of view than the other party.

At what point in the life of the contract must its status be assessed for the purposes of Section 5? In my opinion it is the date when proceedings were commenced or, if the contract was terminated before that date (the jurisdiction clause continuing to apply), the date of termination. That said, I think that it is most important that the assessment should be made having regard to the whole of the preceding life of the contract, particularly where the jurisdiction clause relied on was part of the contract at its inception. This is because Section 5 of the Judgments Regulation is concerned with contracts of employment and also because of the desirability of legal certainty: the parties should know from the outset whether an exclusive jurisdiction clause in a contract involving the provision of services is effective under Article 23 or ineffective under Section 5.

The Agreement grew out of a project pursued in Italy in the late 1990s by the WPP group called Project Wellington. At the end of 1997 the WPP group purchased Mr Benatti’s 14.4% interest in CIA Group plc for £10 million. Discussions then began between the WPP group and Mr Benatti and three of his former associates aimed at involving them in a new WPP group media buying and planning operation, Mindshare Italy. Under the agreement finally concluded Mr Benatti and his three associates were granted a ⅓rd interest in Mindshare Italy and the benefit of put-options. To date, this and further agreements with the WPP group have generated payments to Mr Benatti and companies controlled by him of £13 million. Project Wellington led onto the idea that there should be a second agreement under which Mr Benatti would further assist the WPP group in Italy whilst at the same time remaining interested in a large number of companies, several of which were operating in the advertising, media-buying and planning, and public relations fields in Italy.

Throughout the negotiation of the Agreement Mr Benatti was represented and advised by his lawyer, Mr Ricardo Rossotto of Rossotto e Associati. The Agreement was signed in February 2002. As stated above, the parties are WPP Italy and Mr Benatti and by clause 2.1 Mr Benatti was appointed “as a consultant” of WPP Group plc and of WPP Italy in respect of all their business activities in Italy. Indeed, throughout the Agreement he is referred to as “the Consultant”. Clause 2.1 also provided that “the designation of the Consultant shall be WPP Country Manager for Italy …” The initial term of the Agreement was three years, after which it could be terminated on 12 months’ notice expiring at any time after that period. Clause 3.1.1 obliged Mr Benatti to assist WPP Italy and “the Group Companies” (defined as any subsidiary, direct or indirect, of WPP Group plc and any company affiliated to WPP Group plc) when requested to do so. Mr Benatti was further obliged to report to WPP Group’s Chief Executive (“the CEO”) and be subject at all times to the directions of WPP Group’s Board. In particular, Mr Benatti agreed to assist in: identifying and negotiating business acquisitions; identifying key executives; developing client relationships in Italy; identifying and proposing network synergies for WPP group companies; and assisting the CEO of WPP Group in formulating and implementing strategic objectives in Italy (clause 3.1.2). Clause 3.4 provided that Mr Benatti was not obliged to work on average over any period of 90 days more than 1 ½ days per week.

The remuneration payable to Mr Benatti under the Agreement consisted of: (i) an annual retainer of €198,000 payable quarterly (in respect of which he was to submit monthly invoices) (clause 4.1.1); (ii) a commission of 1% of the cash value of any acquisition introduced by him (clause 4.1.2); (iii) in respect of other work (save for that done for the Mindshare Italy group) a fee payable by the company benefiting from his assistance to be agreed with the Chief Executive (clause 4.1.3); and (iv) such other fees or compensation as might be agreed with the CEO (clause 4.1.4). Mr Benatti was entitled to be reimbursed his reasonable expenses wholly and properly incurred in performance of his duties save for those incurred in respect of a financial adviser or accountant (clauses 4.1.1 and 5.1). He was also entitled to be provided by WPP Italy (at its expense) with a p.a., a secretary and a properly equipped office. Clause 5.3 provided “for the avoidance of doubt” that Mr Benatti was responsible for paying all tax and social security payments.

An important feature of the Agreement was that it permitted Mr Benatti to have an interest in businesses not forming part of the WPP group. The relevant provisions are clauses 3.2, 8.1 and 8.1.1 which read:

As already recorded, clause 11 provided that the Agreement was governed by English law and any controversies arising from or related to the interpretation or enforcement of the Agreement were to be exclusively submitted to the Courts of England. It is to be noted that by the time the Agreement was executed the Brussels Convention had been amended to limit the scope of prorogation of jurisdiction in the case of individual contracts of employment and to provide in Article 5 (1) that in matters relating to such contracts the place of performance of the obligation in question was where the employee habitually carried out his work.

There were listed in Schedule 2 to the Agreement nearly 80 companies which Mr Benatti represented to be all the non-WPP companies in which he had an interest. Amongst these companies were three substantial groups, Blugroup, Onetone and FullSix. It is also important to note that many of the listed companies carried on business in Italy in the fields of advertising and media planning and buying and were therefore competitors of the WPP group in Italy.

The effect of clauses 3.2, 8.1, 8.1.1, and 8.1.2 is that both during the currency of the Agreement and after its termination Mr Benatti was permitted to retain his interest in the companies listed in Schedule 2 and to assist those companies so long as this did not amount to solicitation within 8.1.2, or employee poaching within 8.1.3, or detract from or interfere with his duties under the Agreement or was “detrimental” to the interests of WPP Italy or the WPP group. Mr Benatti therefore had a wide liberty to carry on his pre-Agreement entrepreneurial activities notwithstanding that a substantial proportion thereof were in competition with WPP Italy and the WPP group.

Applying the criteria set out in paragraph 69 above, I am clearly of the view that the claimants’ argument that at its inception the Agreement was not an individual contract of employment is much stronger than Mr Benatti’s argument to the contrary. The principal factors that go into the contract of employment scale include the length of the term of the Agreement, the breadth of the different forms of assistance set out in clause 3.1 and the provision that Mr Benatti should at all times be subject to the directions and instructions of the WPP Group Board (the Board and the CEO being in my view the agents of WPP Italy and of WPP Group). These factors in my opinion are outweighed by the method of remuneration – a low retainer plus commission; the provision that Mr Benatti was not obliged to work more than 1 ½ days a week (which was clearly intended to allow him to spend a substantial amount of time on his other business interests); the types of assistance it was contemplated Mr Benatti would provide; and the liberty granted to Mr Benatti to remain interested in and to assist the companies listed in Schedule 2, many of which were in competition with WPP Italy and the WPP group. It is important to bear in mind that many independent contractors are paid their expenses and are given a very detailed brief requiring them to report to and take instructions from their client. I am also of the opinion that the obligation on WPP Italy to provide a p.a., a secretary and an office points if anything away from a contract of employment since in the employment context such facilities routinely go with a senior appointment, whereas here it was felt necessary to provide for them expressly.

I turn to consider the parties’ conduct under the Agreement and the significance this has in determining the status of the contract. The evidence relevant to this enquiry is voluminous and to a considerable extent conflicting. Certain of the claimants’ evidence came in late which, with the exception of Professor Bruguglio’s statement, I propose to ignore. Making due allowance for the fact that this is an interlocutory hearing in which the witnesses have not been cross-examined my task is to make such findings as can be fairly arrived at. Those findings are as follows.

From the inception of the Agreement until the legge Biagi (a new Italian labour law) came into effect in October 2004, Mr Benatti did not serve quarterly invoices in respect of the retainer fee but was paid this fee in monthly instalments. He was also issued with an Amex gold card to pay his expenses for which he had to invoice WPP Italy.

WPP Italy and Mr Benatti treated the Agreement as being a Contratto di Collaborazione Coordinata e Continuativa (“co.co.co.”)’ which is a particular type of contract distinct from an ordinary employment contract for the purposes of the Italian Codice di Procedura Civile (the Italian CPR) and for the purposes of Italian social security law. Under the legge Biagi co.co.co. contracts have to be in a special form. The Agreement was not in this form, which prompted discussions between Mr Benatti’s lawyer, Mr Rossotto, and WPP Italy during which thought was given to amending the Agreement to allow Mr Benatti to assign it to a company which would be under his sole control. In the event the Agreement was not amended in this way but Mr Benatti agreed to the suggestion that he should register personally for VAT and submit VAT invoices for his remuneration, which he did until the termination of the contract. It is clear that Mr Benatti took this step to reinforce the contention that the relationship between him and WPP Italy was a fully independent and professional one and not one of employer/employee.

In the first year of the Agreement Mr Benatti worked no more than 1 ½ days a week. The social security and industrial accidents insurance payments appropriate to a co.co.co. agreement were deducted by WPP Italy from Mr Benatti’s remuneration and paid direct to the relevant government agencies. In the following year the number of days worked by Mr Benatti increased to about three days a week. On 10 February 2003 he received the €206,582 commission for the Media Club acquisition and in May 2003 it was agreed that from 1^st January 2004 his annual fee would be raised to €500,000. This increase was born out of the fact that Mr Benatti had not been paid any fees by any WPP company benefiting from Mr Benatti’s development of client relationships, identification of key executives, or suggested synergies for the WPP group.

On 12^th May 2003 a formal written amendment to the Agreement was signed which: (a) substituted for clause 4.1.1 a clause that provided for an annual fee of €500,000 payable on a monthly basis; (b) deleted the entitlement to fees from companies benefiting from Mr Benatti’s assistance; and (c) inserted a new clause 5.1.2 entitling Mr Benatti to a company car for his business and personal use subject to a stipulated annual cost. It was also expressly provided in the amendment agreement that “All the other clauses of the Agreement, of which this letter agreement shall be deemed to be part, shall remain in full force and effect.” Accordingly, the provision stating that Mr Benatti was not obliged to work more than 1 ½ days a week remained in full force after the amendment agreement.

In the period March 2003 to November 2003 Mr Benatti was a director of WPP Italy. This was the only Board appointment he held during the currency of the Agreement.

In January 2005 Mr Benatti’s annual fee was increased to €850,000. In a pitch on his behalf to the WPP Group Compensation and Benefits Manager it was stated that the proposed increase “related to a full time job (rather than 3 days a week) wider perimeter of companies and more operative role”. The increased fee was agreed by Sir Martin Sorrell. There is no evidence that he saw or knew of the pitch. He agreed to the increase because he was conscious that Mr Benatti was receiving less than some of his Project Wellington associates, in particular Mr Malegori who had become CEO of Mindshare Europe. Sir Martin was also pleased with the performance of the Italian operations: Mr Benatti had added value and Sir Martin wanted to keep him. Sir Martin did not, however, ask Mr Benatti to work a stipulated number of days a week under the Agreement. He did not know how many days a week Mr Benatti was working and Mr Benatti did not say to him that he wanted the increase because he was working 5 days a week; nor did he offer to work 5 days a week in exchange for the increase.

In the last year of the Agreement (2005) the days Mr Benatti worked increased over time to five days a week. WPP Italy must have realised that he was putting in this amount of time but at no point was he required to do so, whether by WPP Italy or WPP Group.

In May 2004 and 2005 Mr Benatti was granted respectively 2149 and 2235 stock options in WPP Group under the WPP Executive Stock Option Plan. These options were not awarded under the WPP World Leaders Programme but were part of an award to certain Country Managers and key client managers. They were worth about US$9000. After the May 2004 grant Mr Benatti received a letter from Sir Martin Sorrell in these terms:

Although this letter refers to “paid employees” very little, if anything, turns on this since the letter was not drafted by Sir Martin but, save for the opening paragraph, was in common form for despatch to all those who being awarded options.

It is also of some significance that it was not thought appropriate to include Mr Benatti in the WPP group’s Short Term Incentive Plans or Long Term Incentive Plans which typically form a substantial portion of the remuneration of senior WPP executives.

I do not accept Mr Benatti’s claim that he was “fully integrated into the WPP …. with the power to direct and manage the CEO’s in Italy exercising, in effect, the delegated authority of Sir Martin Sorrell, as was understood by all within WPP”. The WPP Italian operating companies had a vertical reporting structure that ended up above WPP Italy because a number of these companies were in competition with each other. The COOs and CEOs of the WPP Italian companies therefore did not report to Mr Benatti but to a supra Italian level. Nor do I accept that Mr Benatti had authority to require the Italian COOs and CEOs to implement his instructions. No doubt those executives knew that Mr Benatti was close to Sir Martin Sorrell and treated him with respect, but it was for them to decide whether to accept his advice and suggestions, including his suggestions as to whom should be appointed to senior positions.

In the April 2003 edition of the WPP newspaper “The Wire”, Mr Benatti described his main activities as Country Manager in Italy as: (i) mergers and acquisitions; (ii) support to operating companies on new business and ongoing relationships where key clients are concerned; (iii) development of inter-Group synergies; and (iv) recommendations for top management recruiting. In my judgement these activities, which track the activities set out in clause 3.1.2 of the Agreement, were indeed his main activities throughout his appointment. Examples of the synergies he proposed were IBOS (Italian Back Office System; FAST (Financial Administration Solutions & Technologies); Shared Service Center (centralisation and standardisation of administrative procedures); and Cross Selling (encouraging companies within the Italian WPP group to persuade clients to use the services offered by other companies in the group). Mr Benatti appears to have taken the initiative with such projects but he was not permitted to develop them until they had been approved by Sir Martin Sorrell. In carrying out his activities Mr Benatti would have one-on-one meetings with the CEOs of the WPP Italian companies and would occasionally meet with them as a group. However, he did not have his own budget. Instead, the cost of his activities had to come out of the individual budgets of the Italian companies.

In addition to these main activities Mr Benatti kept a supervisory eye on the operations of the WPP Italian operating companies and would report on their performance to Sir Martin, but in my judgement this was ancillary to and in aid of his main activities as an adviser and “ideas man”.

Until May 2003 Mr Benatti did not work out of an office provided by the WPP group but from the office of one of his companies, the cost of which was met by WPP Italy on a proportionate basis. In May 2003 WPP Italy’s COO and CFO and Mr Benatti moved to the premises of mediaedge:cia, a WPP operating company, and henceforth Mr Benatti had an office next to that of mediaedge:cia’s CEO. He was also issued with a WPP business card and given two email addresses that were integrated within the WPP group network.

Mr Benatti reported to Sir Martin Sorrell on his activities on a regular basis. He met Sir Martin in London every two months and there were monthly telephone calls. Sir Martin also met Mr Benatti in Italy, particularly in 2005.

How is the Agreement to be analysed in the light of the parties’ conduct? Over time Mr Benatti’s remuneration took on more of the appearance of a salary and in 2005 he came to be working 5 days a week. From May 2003 he had an office within the offices of a WPP Group company. He worked closely with the senior executives of WPP Italy and the Italian operating companies. The implementation of any of his proposals and suggestions all depended on the sanction of Sir Martin Sorrell to whom he reported regularly. All these factors point to a contract of employment. Turning to the factors pointing the other way, Mr Benatti did not hold an executive position with authority over the senior executives of WPP Italy and the operating companies: it was up to those executives whether to adopt his ideas and strategies. Moreover, he was not concerned with the everyday running and management of the WPP Italian companies; rather he was an adviser and “ideas man” who was expected to draw on his considerable entrepreneurial experience in advertising and media buying to come up with strategies and proposals for the Italian operations and promote client relationships. In addition, it was known and understood that he would continue to receive large payments in his entrepreneurial Project Wellington capacity and it was also accepted that he could and would continue to hold business interests in the 80 or so listed non-WPP companies, a number of which were in competition with WPP’s Italian operations. He also remained entitled to a 1% commission on the value of acquisitions introduced by him, a valuable potential entitlement since mergers and acquisitions were one of his main activities.

Further, although in the course of 2005 he came to be working 5 days a week, he was not contractually obliged to do so. Mr Chambers submitted that the Agreement was amended by conduct so as to require Mr Benatti to work full time 5 days a week in exchange for an annual salary of €850,000 but I reject this submission. As I have already noted, the amendment agreement of 12 May 2003 expressly provided that the other clauses of the Agreement remained in full force and effect. In my judgement, Mr Benatti is not to be taken to have exchanged the benefit of not having to work more than 1 ½ days a week for an obligation to work full time 5 days a week unless the conduct of both sides makes this abundantly plain. I find that there is no credible evidence that anyone within WPP Italy or WPP Group plc said anything to Mr Benatti about having to agree to work more than 1 ½ days a week to be entitled to the increased fee of €850,000, or that Mr Benatti made any such offer. On the contrary, the evidence is that the increase was agreed for the reasons set out in paragraph 85 above. Such conduct, in my opinion, is a quite insufficient basis for finding that the Agreement was amended by conduct as submitted by Mr Chambers.

In a situation where there are factors going both ways on the question whether a contract is one of employment, I think regard can be had to conduct of the parties that evidences a positive intention that the contract should or should not be a contract of employment. Accordingly, I propose to give some weight to the fact that in consequence of the legge Biagi Mr Benatti registered personally for VAT and submitted monthly VAT invoices for his fee as he agreed (with the benefit of legal advice) he would. In my judgement this conduct shows that both parties intended that Mr Benatti should perform the services contemplated by the Agreement in a self-employed capacity.

As I observed in paragraph 69 above, the exercise I am engaged upon is one of fact and degree and it must be remembered that different relationships may share to a considerable extent some of the criteria propounded by the ECJ. Inevitably there will be cases that only just come within the category of a contract of employment and there will be cases that only just fall outside that category. Weighing all the factors present in this case I conclude that when the Agreement was terminated on 9 January 2006 (alternatively when proceedings were started on 11 January 2006) it was not an individual contract of employment for the purposes of Section 5. Although it was pretty close to being a contract of employment, it distinctly fell on the other side of the line.

In my judgement, in substance Mr Benatti’s role under the Agreement was in the nature of a self-employed management consultant who for a fee was engaged to come up with proposals and strategies to improve the performance of a corporate group. He could not implement strategies without Sir Martin Sorrell’s express authority and he was under an obligation to report to Sir Martin in detail and on a regular basis. But, as I have said, it is not unknown for management consultants to work under a detailed brief with an obligation to report regularly and in detail to the client and to accept instructions on how the engagement is to be executed. It is also not unknown for management consultants to carry out lengthy engagements which involve them becoming embedded to some extent in the client’s organization.

In the event, therefore, I find that the argument that the Agreement was not an individual employment contract for the purposes of Section 5 of the Judgments Regulation is much better on the material before me than the argument to the contrary. Accordingly, I hold that WPP Italy has established jurisdiction under Article 23 for its claims for breach of the Agreement.

In the course of argument, my attention was drawn to the decision of Judge Pier Paolo Lanni of the Verona Tribunal dated 5 June 2006 granting precautionary measures to Mr Benatti to allow for the return of certain documents. In that decision Judge Lanni said that the Agreement and the documents filed by Mr Benatti lead to the conclusion that the relationship between Mr Benatti and WPP Italy was at least one of “para-subordination” so that Articles 19 and 20 of the Judgments Regulation applied. I was quite properly shown this decision but it was common ground that it is not binding on me. Apart from anything else, the learned judge had jurisdiction to grant interim measures irrespective of Articles 19 and 20, and, as he himself noted, he heard no argument from WPP Italy. I, on the other hand, have heard extensive argument from both sides, and for the reasons I have given I respectfully differ from Judge Lanni’s views on the status of the Agreement.

The Particulars of Claim plead claims by WPP 2005 and BSH for breach of clause 3.2 of the Agreement. Neither of these claimants is named as a party to the Agreement, although Mr Benatti is expressly appointed a consultant of WPP 2005 (named WPP Group plc in the Agreement). BSH is not named in the Agreement at all and Mr Benatti did not know of its existence until after the Media Club acquisition. However, BSH is a wholly owned subsidiary of WPP 2005 and Mr Benatti agreed to assist “the Group Companies in Italy,” which expression includes WPP Group and any direct or indirect subsidiary thereof.

Mr Smouha submits that WPP 2005 and BSH can enforce the Agreement including clause 11 under s. 1 of the 1999 Act. He cites s. 1 (4) of the 1999 Act: “This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract”. He also contends that an analogy is to be drawn with: (a) those cases where it has been held that a claim by a third party on a contract that contains an arbitration agreement must be brought in arbitration, eg Nisshin Shipping Co. Ltd v Cleaves & Co Ltd [2004] 1 Lloyd’s Rep 38; and (b) the European jurisprudence to the effect that where consent to a jurisdiction clause can be shown between the original contracting parties, and a third party succeeds to the rights of one of those parties (as a matter of national law), the third party also “succeeds” to the jurisdiction clause so as to satisfy Article 23 of the Judgments Regulation, eg Case 71/83 The Tilly Russ.

Mr Chambers contends that s. 1 of the 1999 Act is of no assistance to these claimants because clause 11 does not purport to confer a benefit on a third party. He also relies on s. 6 (3) of the 1999 Act which provides that s.1 confers no right to enforce any term of a contract of employment.

In my judgement, for the reasons submitted by Mr Smouha and in light of my finding that the Agreement is not an individual contract of employment for Section 5 purposes, WPP 2005 and BSH have a good arguable case that the court has jurisdiction over their claims for breach of the Agreement by virtue of Article 23.

The fiduciary duties relied on arise directly from the Agreement and in my opinion the claims for breach of these duties fall within the words “any controversies arising from or related to the …enforcement of this contract” in clause 11. Given my finding as to the nature of the Agreement, I hold that the English court has jurisdiction over WPP Italy’s claim for breach of fiduciary duty under Article 23.

So far as WPP 2005’s and BSH’s breach of fiduciary duty claims are concerned, the submissions were essentially the same as those summarised in paragraphs 102-103 above with Mr Smouha arguing in addition that the situation was comparable to that in: (a) Nordic American Shipping AS v KS AS ManhattanTankers [1996] I.L.Pr. 400, where the Norwegian Supreme Court held that a claim for general average against the head charterer was to be brought in the jurisdiction provided for by the jurisdiction clause in the contract between the claimant and a subcharterer, since although the claim was brought against a party who was not privy to that contract, it was based on and derived from it; and (b) Gerling Konzern Speziale Kreditverscherungs- AG v. The Italian Treasury [1983] ECR 2503, where the ECJ held that a beneficiary of an insurance policy (to which it was not party) was entitled to avail itself of the jurisdiction clause therein.

I prefer Mr Smouha’s submissions to those of Mr Chambers. In my judgement there is a good arguable case that Article 23 affords jurisdiction in respect of WPP 2005’s and BSH’s claims for breach of fiduciary duty

The conclusions I have reached render it unnecessary for me to deal with the claimants’ alternative submissions based on Articles 5(1) and 5(3). Suffice it to say that if I had been of the view that the Agreement was an individual contract of employment for the purposes of Section 5, I would have held that all of the claims for breach of fiduciary duty were claims brought by “the employer” on the Agreement for the purposes of Article 20 (1), with the result that the breach of fiduciary duty claims would have had to be brought in the state of Mr Benatti’s domicile.

For the reasons given above, the English courts have jurisdiction under Article 23 of the Judgments Regulation over all of the claims brought by the claimants against Mr Benatti.

Accordingly, Mr Benatti’s application challenging the jurisdiction of the court is dismissed.