Ghanem Al -Thani Holdings WLL v Jaguar Cars Exports Ltd

“Until the Claimant had recouped its investment into the venture, the defendant would not terminate the Agreement without cause.”

“The only basis on which the defendant would be entitled to terminate the Agreement before the claimant had recouped its investment into the venture would be if the claimant committed a material breach thereof.”

The Agreement was thereafter signed by the chairman of the claimant and the claimant’s case is that he did so, induced by, and in reliance upon, the statements made by Mr. Felton. Thereafter the claimant invested money into the purchase, setting up and resourcing of the agency and distributorship whilst seeking to improve the sales of Jaguar vehicles in Qatar. At the time of the termination, the claimant had been acting as distributor for 8½ years and had not made a profit in any of those years. Its total loss was approximately £7 million in that period and it had entered into a 3 year contract with Mowasalat and with purchasers of Jaguar cars which involved free servicing for a period of 3 years so that, following the termination, it was left exposed to those entities in relation to the provision of after sales care, without the support of the defendant and access to Jaguar spare parts, save through the new distributor appointed in Qatar in its place. The claimant seeks damages for misrepresentation in tort and/or for breach of a collateral contract made on the 11^th May and/or for repudiatory breach of the Agreement (varied by the oral contract made on that date), together with an indemnity against claims made made by Mowasalat and/or persons to whom it is exposed under the terms of its 3 year contracts.

The trial is a trial on liability only. The defendant denies that there were any representations or assurances made of the kind alleged on the 11^th May 1998, although it is accepted that there were discussions between the parties as to the no-fault 12 month termination provision in clause 18.1. Whether the case was put in contract or tort, there was no foundation for it. Moreover, the defendant submits that there could not have been any reliance upon anything said because the claimant took on the distributorship for “prestige” reasons and not with a view to making profit. Further, the defendant relies upon clause 19 of the Agreement as an answer to the claim in contract, though not the claim in tort.

Both parties asserted, at the outset, that, if assurances were made, as alleged, that would amount to fraud on the part of Mr. Felton. The Claimant, although not needing to assert fraud, does so and in his own statement, Mr. Felton maintained that he could not have given the assurances alleged by the claimant, because it would have been fraudulent to do so. The reason for that appeared to be his acceptance that he would be deceiving the claimant, if he said that the defendant would not terminate the Agreement, prior to recoupment by the claimant of its investment because he knew that the defendant would never be agreeable to that. It would be an open ended commitment, since future profitability was unknown and the claimant appeared to him to have extravagant ideas for expenditure on, inter alia, a multi million prestige showroom. Whilst there may have been forensic reasons for this approach on both sides, which put issues into sharp focus, I am conscious that there is a spectrum of possibilities as to what was said, with differing nuances and potentially different underlying states of mind. In considering matters which took place about 14 years ago, great care is needed in determining the position.

The Background

The Chairman and main shareholder of the claimant is His Excellency Sheikh Ghanem Bin Ali Al-Thani (Sheikh Ghanem). Its group financial director was Mr. Jeitem whilst its chief accountant was Mr. Fernandes. The group’s legal advisor was Mr. Salah. The Claimant runs a number of successful business enterprises and Sheikh Ghanem is a man of considerable wealth. Mr Felton was the defendant’s Regional Manager for the Middle East for a period of around 4 years, with responsibility for Qatar. He was answerable to the Managing Director of the defendant in England and liaised with the Head Office there in relation to distributorship arrangements and business plans.

Until 1998, the defendant sold cars in Qatar through a Qatari distributor called Doha Motors & Trading Co (Doha Motors), with disappointing results. It appears that, over a period of in excess of 10 years, the average number of Jaguar cars sold by Doha Motors was about 5 or 6 a year. In the last few years, many of those were to Sheikh Ghanem and his family. In circumstances which are in dispute, Doha Motors , the claimant and the defendant agreed in early 1998 that the claimant should become the distributor for the defendant in Qatar in place of Doha Motors . Because of the ethos and legislative environment in Qatar at that time, where commercial agents were accorded a certain status, it would be open to an outgoing agent to cause problems for an incoming replacement, without a deal of some kind being done between them. The claimant agreed to pay Doha Motors, pursuant to a letter of offer dated 1^st March 1998, signed by Sheikh Ghanem, a purchase price equivalent to approximately £2 million, payable in instalments, subject to the agreement of the defendant and Saab to the transfer of their distributorships to the claimant. There is an issue between the parties as to the extent to which the defendant was aware of the details of these arrangements.

On 11^th March 1998, Mr. Felton on behalf of the defendants met with Sheikh Ghanem, Mr. Fernandes and Mr. Jeitem, together with a representative from Doha Motors who introduced them. At that meeting the parties discussed the difficulties facing the Jaguar brand in Qatar, which included a poor perception as to the reliability of the cars, and the need for any incoming distributor to spend money on raising the positive profile of the brand. Again there is dispute as to the extent of discussion about the need for substantial investment if the sales figures were to improve.

There followed a sequence of five or six further meetings between the claimant’s representatives and Mr Felton, culminating with the meeting on the 11^th May 1998 at which the alleged assurances were given and the Agreement signed.

The Witnesses

I heard evidence from four of those present at the meeting, including the claimant’s representatives, Mr. Jeitem, Mr. Fernandes and Mr. Salah (but not Sheikh Ghanem), and from Mr. Felton, the defendant’s Regional Manager at the time who retired in 2000. I also heard evidence from his successor Mr. Gawthorpe and from Mr. McClure, the General Manager of New Cars Centre who was brought in to run the distributorship following the conclusion of the Agreement. Neither the evidence of Mr. McClure nor Mr. Gawthorpe related to the critical meeting and the only real relevance of their evidence related to the commercial dealings between the parties which reflected on the probability or likelihood that the assurances had been given. The major area on which their evidence was of relevance related to the termination and the parties’ reactions to it.

In essence, I have to decide on a conflict of evidence between Mr. Felton on the one hand and three witnesses from the claimant, Mr Salah, Mr Jeitem and Mr Fernandes, on the other, in the light of the background, the parties’ conduct, the documents and the commercial probabilities. Because the Agreement was concluded some 14 years ago and even the termination meeting was over 5 years ago, I would not expect the witnesses to have any detailed recollection of specific meetings, which means that the focus must be on the common ground between the parties, the broad sweep of their evidence of what was said, the commercial realities and probabilities and their conduct, insofar as it sheds light on what was said. It is all too easy for witnesses to think back and work out what, in their view, ought to have happened or must have happened, if their position is to be justified and justice, as they see it, is to be done, and to conclude from that premise that this is what in fact happened, and what must have been said at the meeting.

I did not conclude that any of the witnesses deliberately told me lies, but, for the reasons given above, some of their evidence, in my judgement, suffered from a degree of wishful thinking and I do not find that any of those who claimed good recall of the meeting of 11^th May 1998 and of the words actually spoken, really had that.

The Doha Agency

Mr. Felton’s evidence was that Doha Motors was an unsatisfactory agent. It was the franchisee when he took over responsibility for the area and had been the Qatar distributor for the defendant for a period in excess of 10 years. It did not meet the defendant’s expectations with regard to sales or after sales services. In his view, it had never been satisfactory but, in the last 3 or 4 years it lacked capital and was slow in paying with the result that deliveries were delayed. The defendant would only deliver cars to Doha Motors against letters of credit. Mr. Abbas, its Principal, was the local representative of HSBC and Mr. Felton would discuss the financial situation with him though he could not recall whether he inspected Doha Motor’s books. They would meet every 3 or 4 months but he was not seeking a confrontation with him despite the unsatisfactory situation.

In the light of the problems over the 3 to 4 years preceding 1998, the defendant became keen to find a replacement distributor. Mr Felton suggested to Mr Abbas that it would be better for all concerned, including Doha Motors, if a replacement be found. Mr Felton looked for a possible alternative distributor but came up with no one suitable. Mr. Abbas did not simply wish to give up the franchise and at that time it was, Mr. Felton said, the defendant’s policy not enter into conflict with existing franchisees, even if it wished to escape from the franchise arrangement. At that time it would be true to say that the defendant did not terminate franchises even for breach if it would lead to trouble. The defendant was looking for an amicable parting of the ways and Mr Abbas, it seems, was looking for some money.

The “Transfer” of the Distributorship from Doha Motors to the claimant.

The evidence of Mr. Fernandes was that Mr. Abbas contacted him and arranged a confidential meeting, at which he said he was planning to give up being the agent for Jaguar and Saab and wondered if Sheikh Ghanem was interested in becoming agent for these manufacturers, because he had bought several Jaguar cars. If Sheikh Ghanem was not interested, he would look elsewhere. When this was relayed to Sheikh Ghanem, the evidence is that the latter was very interested and it became his number one priority to obtain the distributorships. In consequence, Mr. Jeitem, the group Financial Director and Mr. Fernandes met with Mr. Abbas 4 or 5 times in January 1998 to check the books, take an inventory of stock and parts and have general commercial discussions. Mr. Abbas was looking to “sell” the distributorship for QRs 12 million in total (approximately £2 million). Following negotiations for a lesser sum, there was a meeting in the claimant’s offices on 1^st March 1998, at which Sheikh Ghanem agreed to pay Mr Abbas the price sought, which reflected approximately QRs 11.5 million for Jaguar and QRs 0.5 million for Saab. The agreement was recorded in a “Letter Offer” of that date which provided for a payment of QRs 5 million, once consent from Jaguar and Saab was obtained. The balance was to be paid in a further 18 monthly instalments starting on 1^st May 1998, if consent had been obtained by then. The sale and transfer of the business, including its stock (worth about QRs 4.5m) was expressly conditional upon Doha Motors’ procurement of the consent of Jaguar and Saab to the assignment of the relevant franchise/dealership agreements, to enable the registration of the agency in the name of the claimant at the Commercial Registration Department at the Qatar Ministry of Finance. Cheques for the QRs 5 million and later instalments were lodged and held by a bank, to be released in accordance with the Letter Offer, if Jaguar and Saab agreed to appoint the claimant as distributor.

On 4^th March 1998 Mr. Abbas wrote to Sheikh Ghanem advising him that he had “communicated” to Mr. Felton “regarding the offer”. The letter went on to say that “they have informed us that the proposal will be taken up with a UK office after receipt of a satisfactory 5 year Business Plan from you” and that the process would take at least 2 months from the date of receipt of that plan at their office. Mr. Felton was however due to visit on the 11^th March and had, Mr. Abbas said, agreed to meet Sheikh Ghanem that day.

It was the evidence of the claimant’s witnesses that the existence of Sheikh Ghanem’s offer and the terms of it were common knowledge in Doha. Mr. Fernandes’ evidence was that Sheikh Ghanem handed over a copy of the Offer Letter to Mr. Felton when he met him on 11^th March 1998, though that was not in his statement and was volunteered in oral evidence to the court. The claimant’s witnesses said that it was not only the defendant that knew of the terms of the offer and the payment of QRS 12 million but that HSBC management knew, the British Ambassador knew and the Commercial Attaché of the British Embassy in Qatar also knew. Mr. Jeitem told the court that he had heard from HSBC that Mr. Abbas was going to use the money to clear Doha Motors’ outstanding debt to the defendant and a mortgage on property in favour of HSBC. Mr. Jeitem said that “half of Qatar” was aware of the deal, that “everybody in Doha” was aware of it and that Mr. Felton met the Ambassador before the deal was finalised and was aware of the figures, just as the Ambassador was. Mr. Felton was the man involved in the deal, helping Mr. Abbas to release the agency and to secure the claimant as replacement and had to know all that was going on.

Mr. Felton’s evidence was however that he did not know the terms of any offer made to Doha Motors by Sheikh Ghanem and knew nothing about any exchange of money or sale of the franchise. He did not wish to know. Whilst the defendant was dissatisfied with Doha as distributor and wanted a replacement who was sufficiently capitalised to function effectively, he wished to tread delicately and to avoid confrontation. Whilst there was talk of a “transfer” of the distributorship, there had to be a termination of the arrangements with Doha Motors before there could be a new appointment of the claimant as distributor. An application to be a distributor had to be made and approval given at the defendant’s head office to any recommendation he made, after conducting “due diligence” on the suitability and standing of the potential new distributor. He said that, when considering a new distributor, he was only interested in finding someone who was interested in making money, albeit not in the short term, because there would inevitably be a start up period of 3-4 years, before the new distributor could break even, particularly starting from such a low base of sales achieved by Doha Motors.

Sheikh Ghanem was suggested by Mr. Abbas and the defendant’s investigation showed that he could put in the necessary funds and Mr. Felton thought that he was interested in making money eventually, though he was also interested in the franchise for reasons of kudos and prestige. He had previously owned the BMW distributorship, but this had been taken away from him by a more senior member of the Royal Family. The letter of 4^th March 1998 from Doha Motors to Sheikh Ghenem accurately referred to the need for production of a 5 year Business Plan, with a view to seeing if the franchisee was suitable and the franchise was workable. That plan would then be the subject of discussion between the potential franchisee and the defendant.

Mr. Felton said that he did not know about QRS 12 million changing hands and, if he had known, he would have advised that this figure was grossly excessive. A new distributor would be effectively starting from scratch, so there was no goodwill to be purchased and only the stock and employees to be taken over. He was taxed about this in cross- examination and said that he did not want to know, since it was not his business nor the defendant’s to know. If someone had started to tell him of it, he would have stopped them from doing so, because he did not want to know what was going on outside the franchise. He said he would not have been surprised if money had changed hands, as that was the way of the business world in the middle east at the time.

A Business Plan was produced by the claimant, which envisaged progression from the sale of 50 cars in the first year to a figure in excess of 200 cars in the fifth year (albeit that different figures appeared in different parts of the document). Mr. Felton thought that, although the Qatar luxury car market was small and competition was tough, this figure was achievable at the time but it made provision for the build up of sales of X200 cars to 60 pa over the 5 year period, but that model, in practice, proved to be “a bit of a disaster”. He anticipated that break even would appear in about year 3/4 when sales rose to about 90 cars per annum, working on a 10% profit margin on each, with an appropriate level of expenditure for the volume of sales. Having started a number of franchises elsewhere, he said it did not make sense to spend more than the sales needed at the outset and that it was best to start “skinny” and spend more as the sales increased. He had no recollection of Mr. Jeitem ever saying to him, as Mr Jeitem testified, that the claimant anticipated to break- even at 200 cars at about year 5.

The Business Plan however referred to the claimant’s plan to house its business operations in two phases . At first there would be temporary facilities with a showroom which was to be refurbished (at a cost of around £400,000) in accordance with the defendant’s minimum standard and corporate brand, whilst after sales services would be based at a sister car company’s premises. Permanent business facilities were envisaged – “NCC have planned to build its own multimillion state of the art business facilities matching with Jaguar identity specifications and standards”. There was to be a new showroom and administrative office complex next to the Ramada Hotel which was owned by the claimant and another showroom and after sales workshop at the Doha industrial estate, with planned staff accommodation alongside. Mr Felton’s evidence was that he strongly advised against any expenditure of this kind beyond the “temporary facilities” but told the claimant what were the minimum Jaguar requirements for the latter, including the corporate brand colour schemes, advising on the tiling and other décor, whilst the claimant did all the necessary procurement, ordering and refurbishment.

On April 11^th 1988 Mr Felton faxed Mr Jeiten stating that most of the issues about the ‘possible transfer of the Jaguar Franchise’ had been cleared up but he was awaiting a letter from Mr Abbas accepting termination of Doha Motors’ distributorship, which he expected to receive that coming Sunday. Nothing was to be finalised until the new contract had been approved and signed by the defendant’s board of directors and no building alterations (for the temporary showroom) should be effected until that was done. He recommended that the claimant engage a General Manager through recruitment agencies in the UK, attaching a separate sheet with what he considered to be the requirements for that person. He said he would be prepared to help in the selection process once CVs were available.

By the time of the meeting of 11^th May 1998, preparations were under way, in the hope or expectation that a distributorship agreement would be signed. As a Jaguar sign maker was in the Middle East, he called in at Doha to measure up for the signage for the new distributorship, staying the night at the Ramada Hotel at the claimant’s expense. Expenditure of some £400,000 was envisaged on the ‘temporary’ showroom but, as Mr Felton’s fax of April 11^th shows, he, at the instigation of his head office, told the claimants to hold back from the expenditure until matters were finalised and the Agreement executed.

The Meeting of May 11^th 1998.

It was essentially common ground that this meeting occurred in Mr. Jeitem’s office, with Mr. Fernandes, Mr. Jeitem, Sheikh Ghanem and Mr. Felton present. Sheikh Ghanem spoke in Arabic and Mr. Jeitem translated what was said by him and by Mr. Felton.

Mr. Fernandes’ evidence was that Mr. Salah was also in the room though others said that he came in when asked. According to Mr. Fernandes, Mr Salah had the Agreement with him which had been sent by the defendant the previous day. Sheikh Ghanem, speaking in Arabic, asked Mr. Salah whether he had been through the Agreement, to which he responded that he had, but that he was unhappy with one clause, clause 18, because it provided that the defendant could terminate the contract by giving 12 months’ notice at any time. Sheikh Ghanem’s reaction was to say that this was not possible because he was already engaged to the tune of QRs 12 million with blocked funds at HSBC and was looking to invest more. For the defendant to be able to terminate simply on giving 12 months’ notice, when he was investing sums of this kind, was unacceptable. Mr. Jeitem then translated Sheikh Ghanem’s comments for the benefit of Mr. Felton.

According to Mr. Fernandes, Mr. Felton said that this was no problem. The Agreement was a Jaguar standard contract but Jaguar would not terminate the Agreement unless the distributor was in breach and it would not terminate the Agreement until the distributor had recovered its investment. That was then translated for the benefit of Sheikh Ghanem who, after considering the matter, said that if Mr. Felton was giving this kind of assurance, he was trustworthy and the contract would not be terminated until his investment was recovered. In consequence he agreed to sign the Agreement, which he did and he and Mr. Felton then shook hands.

Mr. Jeitem’s evidence was that Mr. Salah was called into the meeting and brought with him the Agreement which had already been signed by the defendant. Mr. Salah raised the question of the 12 month termination provision with Sheikh Ghanem who said: “No way. I cannot accept”. After translation Mr. Felton responded by saying that the defendant would not terminate the Agreement as long as there was no severe breach by the distributor. He pointed to the position with Doha Motors, stating that Doha Motors was not doing well but that the defendant was trying to help and it was not the defendant’s habit to walk away from a dealer.

Mr. Jeitem’s evidence was that Sheikh Ghanem would not have signed the Agreement without receipt of such an assurance from Mr. Felton and that, because they had already had a series of meetings with him between 11^th March and 11^th May, they trusted him.

Mr. Salah testified that he was called into the meeting, without realising that a meeting was taking place. He thought that Sheikh Ghanem simply wanted to ask him a question and had no idea that he was going to ask about the Agreement, with Mr. Felton present. He did not take any document with him into the meeting but the Agreement was there in the office. He had been through a copy of it himself and, when asked by Sheikh Ghanem, told him that clause 18 provided that the defendant had a right to terminate the Agreement without any cause by giving 12 months notice. Sheikh Ghanem’s response was to say that he could not enter into such an agreement because he had already invested money and was going to invest a lot more. It was unacceptable for the defendant to be able to come and give 12 months notice. He was not prepared to enter into an agreement of that kind since there was the possibility of losing all his investment in such circumstances. That was translated by Mr. Jeitem for Mr. Felton.

Mr. Felton’s response was to tell Sheikh Ghanem not to worry. The Agreement was the defendant’s standard agreement for the whole of the Gulf area and “we are not going to terminate this Agreement unless Ghanem Holdings commits a severe breach”. As an example of the defendant’s approach he referred to Doha Motors, the existing agent, whose performance was known to be unsatisfactory, whose contract was not terminated by the defendant, but was to come to an end by agreement. There was therefore no need to worry about Ghanem Holdings investment. On that being translated for Sheikh Ghanem, he said: “Okay. I will sign that Agreement”.

As a lawyer, Mr. Salah was asked why it was that he did not require clause 18 to be altered in order to protect the claimant’s position. His response was that Mr. Felton had said that it was a standard agreement which could not be amended or changed but that he assured them that the defendant would not exercise its rights under the clause without a severe breach of the contract. The clause could not be changed but it was agreed that the clause would not be enforced.

He said that he did not take any notes of the meeting because that would serve little purpose. If there was to be no further document signed by both sides, his own note would only be his own evidence and Sheikh Ghanem knew all that had taken place anyway. Without that promise, Mr. Salah said that Sheikh Ghanem would not have signed the Agreement.

Mr. Felton denied that he had ever given the assurance to which the claimant’s witnesses testified. In his witness statement he said that the point was picked up that the contract was, in effect, only for 12 months, but he did not recall the specifics of the discussion about the issue. He stated that he was confident that he would have given his stock answer which was that this was the Jaguar contract, which he could not change, which was the same for all importers in the Gulf and other markets. He said he had no recall of any expression of concern about recoupment of the Sheikh’s investment or of any suggestion that there should be no termination under the 12 month provision prior to that recoupment. It was his invariable practice to state that the defendant only ever contracted on the standard terms of the Agreement. If asked what sort of things caused the defendant to terminate, he would have explained that non payment for stock or failure to undertake marketing was “frowned upon”. He might well have explained that the defendant, in practice, tried to resolve problems with dealers, rather than terminating them.

In his oral evidence, he recalled that the main debate was about the Agreement being what he described as a “rolling year contract – a rolling 12 month contract”. He explained that everybody else in the Gulf had this type of contract and had gone on to say that it would be unusual for the defendant to terminate for anything that was not serious, because that was the position at that time. He would have explained what was serious for the defendant, such as a failure to pay or a failure to participate in marketing - serious breaches of the terms of the Agreement that was being discussed. He would go on to say, because it was his belief, that the defendant would always try to work through problems since, having lived in the Middle East, he knew that if you went down the wrong road you could be in serious trouble. He said that he could not make changes to a legal document that was not in his ownership. It was the defendant’s document.

In cross examination Mr Felton said he did not have a clear recollection of who was present at the meeting but had some recollection of the content of discussion. He recalled the discussion about the 12 month termination provision and Sheikh Ghanem’s concerns that the Agreement could end after 12 months. He accepted that Sheikh Ghanem was not prepared to sign the contract before that issue had been resolved. He said he could remember what would have been said, despite those passages in his witness statement which suggested he did not recall specifics of the discussion on that issue and did not recall Sheihk Ghanem expressing concern about recoupment of his investment. When he said in his statement that he might have well have been asked questions and would have explained the position, he said he was trying to be truthful and because he gave stock answers to things that he could do nothing about when dealing with franchises. He was very clear that he could not have said that there would be no termination until the claimant had recouped its investment. It would have been dishonest to do so and against the contract rules of the franchise. When pressed, he said he could be pretty sure that what he said was that it was not Jaguar’s norm to terminate unless there had been a serious violation of the contract such as non payment and failure to market. He could not have said more than that. He could or would have said that it was highly unlikely that there would be termination without serious breach and the defendant had not done so in the past, normally solving problems by negotiating and fixing them. He could not say anything more than that.

If he had said that the defendant had a policy of not terminating its franchises, even if there had been a breach, if it would get the defendant into difficulty, that would have been true but he did not use those words. He agreed that he could not remember exactly what he had said and if he had said that the defendant was not going to terminate unless there had been a severe breach of the Agreement that would have been true.

Despite any suggestion to the contrary, it was clear to me that Mr Felton, in his evidence, consistently denied that he had said what he was to have alleged to have said because he could not have said anything which would change the terms of the Agreement or derogate from the defendant’s rights of termination thereunder.

The course of the distributorship

Mr Felton accepted that he was ‘hands on’ in assisting the claimant in the refurbishment of the showroom which the claimant had leased and on which the figure of about £400,000 was spent. Because of his experience of setting up franchises, he was able to make recommendations as to the type of tiling required as well as providing them with the information about the defendant’s corporate brand, image and marketing requirements. This included details such as the colour scheme to be employed, signage and matters of that kind. He was also involved in the interviewing of Mr McClure, who became the claimant’s General Manager. He recalled so doing but his recollection was at fault, as compared with the detailed recollection of Mr McClure, which is not surprising since, as Mr Felton himself pointed out, it was a life changing event for Mr McClure, who moved out from England to Qatar, whilst it was an event of much lesser significance for Mr Felton. I gain no assistance from any inaccuracies in Mr Felton’s evidence relating to this, in assessing his credibility and reliability about the meeting of the 11^th May. I reject the suggestions that were made to Mr Felton in cross examination that he acted prematurely in relation either to refurbishment of the showroom or engagement of Mr Mc Clure and that this conduct is all of a piece with giving such assurances as were necessary to ensure that Sheikh Ghanem signed the Agreement and the defendant secured a replacement distributor in lieu of the unsatisfactory Doha Motors. In fact, the evidence in relation to Mr McClure’s appointment is that, following his interview in England by Mr Felton, and Mr Felton’s recommendation of him for the job, when he arrived in Qatar shortly thereafter for what he thought was an interview with the claimant, it was the claimant’s representative who assumed that he was definitely coming as General Manager, but I am clear that it was their decision to engage him, as Mr Felton said it was. Mr McClure took up his position as General Manager on 13^th August 1998, by which time the set up of the showroom had already been organised, though the work was not concluded until November.

Subsequently the claimants set up a air conditioned workshop at a cost of QRs 7 million (over pounds one million). This was the first such air conditioned workshop built in Qatar. Mr McClure’s evidence was that, up to the time when Mr Felton retired in 2000 he was in weekly contact with him and gave him updates as to the progress of this workshop, including the cost. Mr Felton’s evidence was that he was not involved in the planning of this air conditioned workshop and had clearly expressed his disapproval of the project, given the extent of expenditure required and the limited sales which were being achieved. In the years between 1998 and 2000, yearly sales ranged between 28 and 58 cars. In the years 2003 -2006, the annual sales were 80, 53, 84 and 198. The 2003 sales figure hit the target and the 2006 figure exceeded it (146%), but, with the exception of those two years, the claimants never achieved the targets set in the business plan or its successors. As already mentioned earlier in this judgment, the claim made by the claimants is that it sustained nett losses in excess of pounds £7 million over the total period of the distributorship. At one stage, this required an injection of QRs 40 million by way of capital by the claimant into this division of its business.

Mr McClure’s evidence was that, in order to raise the profile of Jaguar cars and to improve its position in the market, the claimant introduced free servicing for 3 years or 60,000 kilometres. This was introduced in 2002 and proved expensive. The claimant was, however, taking a long term view of its investment. Mr McClure’s evidence is also that he persuaded the defendants to extend their warranty from a one year period to a three year period and this was introduced in 2003.

On the 10^th January 2006 the claimant entered into an agreement with Mowasalat Motors for the sale and servicing of 100 cars. Under the terms of the agreement, the claimants would service and supply parts to the cars for a 3 year period running from 30^th August 2006. Under this contract the claimant was under continuing obligations by clause 4.7, 7 and 8, notwithstanding the termination of the distributorship.

The documents and Mr McClure’s evidence reveal that there were delays in payment due from the claimant to the defendant in 2000-2001 and again later in 2004. There was an agreed rescheduling of payments in early 2001 and reference made in a letter from the defendants to being ‘on the point of instigating a review to find a willing buyer for the jaguar franchise in Qatar,’ which was suspended pending fulfilment of the promises of payments contained in a letter from the claimant. In a further letter of the 20^th February 2001 the claimant recorded its dismay that the defendant had been ‘at the point of instigating a review to find a willing buyer’ and made various points in it s defence, none of which refer to any promise made at the meeting of the 11^th April 1998.

Correspondence in 2005 reveals the unhappiness with the performance of the franchise in Qatar, as does a defendants internal assessment in September of that year which refers to a formal review of alternative distributors who might be appointed. There is reference to the objective of a ‘amicable transfer of franchise’ and a fall-back of giving notice of ‘12 months no cause termination’.

The termination of November 30^th 2006

Following the conclusion of the Mowasalat deal, said to be ‘the biggest car deal that has ever been done in the Middle East’ and the final delivery of the last 30 cars in September 2006, the defendant congratulated the Claimant on that success.

Nonetheless, Mr Gawthorpe called Mr McClure to say that he was intending to visit Qatar on the 30^th November. He came with another representative of the defendant who could speak and understand Arabic. At a meeting in Mr. Jeitem’s office Mr Gawthorpe informed Sheikh Ghanem, Mr Salah and Mr McClure that the defendant was terminating the Agreement and produced a letter of that date to that effect. In it, the defendant said that it had undertaken a formal strategic review of the Qatar market earlier in 2006 and that it was essential for the defendant to achieve the optimum market structure for its representation to deliver long term performance and viability. In these circumstances the defendant stated that it had decided to conclude its relationship with the claimant and gave 12 months notice in accordance with clause 18.1 of the Agreement, terminating it on the 30^th November 2007. The letter expressed the hope that the claimant would respect the decision and that ‘an amicable closure to the relationship can be achieved’.

Mr McClure’s evidence was that, when Mr Gawthorpe said that the defendant was terminating the Agreement the room went very quiet and everyone on the claimant’s side was in shock. When Mr Gawthorpe was asked for the reason for the termination, he said that it was do with the future of the defendant in the Middle East. Sheikh Ghanem asked about the significant investment he had made over a 9 year period. Mr Gawthorpe, according to Mr McClure , seemed sympathetic and stated that an amicable resolution would be found. Mr McClure understood by this that the claimant would be compensated for the loss of the distributorship. No specifics were discussed. It was both Mr Gawthorpe’s and Mr McClure’s evidence, and I so find, that, at that meeting, no one referred to a promise made at the time of execution of the agreement about not exercising the right to terminate. Mr McClure explained that this was because the claimant’s representatives were in shock.

Correspondence following termination.

On the 5^th November 2006 the claimant wrote a letter to the defendant responding to the termination letter of the 30^th November. It included the following :-

The letter did not expressly refer to any promise not to terminate the Agreement made on the 11^th May 1998, although it did state that the claimant considered that the action taken by the defendant was a breach of contract. No reason was given for that assertion.

On the 20^th December 2006 the claimants wrote again referring to the letter of 5^th December and the fact that ‘there is no valid reason of termination’. The letter sought compensation for the build up of good will and the expenses of the showroom, the workshop and the Mowasalat workshop which had been built as part of the Mowasalat deal. Also claimed were the losses suffered. Reference was made to Qatar law. It was contended that an indefinite contract could not be terminated under that law without the agreement of both parties or a judgment of the court and that compensation was payable regardless of any agreement to the contrary (presumably a reference to clause 19 of the Agreement). Once again there was no reference to any promise made at the meeting of 11^th May 1998.

The first indication of any reliance on assurances given in relation to termination of the Agreement, appears in a letter of 15th June 2007 from the claimant which complains of the absence of any good reason to terminate the contract and in paragraph 14, stated that, in the course of negotiations in March, April and in early May 1998, it was made very clear that ‘having obtained the agency and made the necessary investments, we could expect to be allowed to retain the agency until and unless we did something serious to breach the terms of the Agreement. In the event that the franchise was (for any reason than breach of contract) to be transferred to another party we would be provided with a fair opportunity to recover our investment.’

Paragraph 15 of the letter averred that, following these discussions and in reliance on them, the Agreement had been concluded and that, in the absence of breach, termination was not an available option to the defendant.

The language of paragraph 14.4 of the letter is plainly of significance. It refers to an ‘expectation’ of being allowed to retain the agency in the absence of a serious breach of the Agreement. It does not refer to any promise with contractual force or assurance that the contract would not be terminated in the absence of such a breach. Furthermore, the second sentence of the paragraph refers to a transfer of the franchise to another party in the absence of breach, a point which is entirely inconsistent with an inability to exercise the rights under clause 18.1. The assertion is that, in such circumstances, the claimant would be provided with a fair opportunity to recover its investment. The only meaning that can be given to this is that the defendant would receive compensation, either from the new distributor or from the defendant in respect of its outlay. What may have been in mind was the ‘sale’ of the franchise, on transfer, in much the same way as the claimant had paid a sum to Doha Motors.

Analysis of the nature of the claim and the claimant’s evidence.

Although, in its skeleton argument, the defendant took points about the nature of any representation alleged and whether it could constitute an actionable misrepresentation, insofar as it was only a statement of intention, it was accepted that a statement of intention could, in some circumstances be regarded as a statement of fact amounting to a representation as to the representor’s state of mind. On the evidence of Mr Jeitem and Mr Salah, the assurances given by Mr Felton would amount to independent promises on the part of the defendant – a classic collateral contract. If Mr Felton said that Jaguar would not exercise its rights under clause 18 and would only terminate in the event of a severe breach, that was not a statement of intention, nor a declaration of his state of mind but a promise as to future conduct. No question of truthfulness or misrepresentation arises. If he stated what the defendant’s policy was or what it usually did, then such a statement would be capable of amounting to a misrepresentation if it was untrue. Mr Felton was prepared to accept that, if he had said that the defendant would not terminate the Agreement until the claimant had recovered its investment, that would have been dishonest since that would not have reflected his or the defendant’s intention for the future, but only Mr Fernandes gave evidence that he did say that.

It is to be borne in mind that the pleaded allegations in the Particulars of Claim, as set out earlier in this judgment refer to misrepresentations that, prior to the claimant’s recoupment of its investment, the defendant would not terminate the agreement without cause or would only be entitled to do so in the event of a material breach by the claimant. Both representations were specifically linked to a non exercise of clause 18 rights prior to recoupment of the investment.

As only Mr Fernandes’ evidence in any way supported a representation along those lines and (as appears hereafter) I am unable to accept his evidence in the light of the other evidence, questions of dishonesty and misrepresentation do not arise. It was common ground between the parties that if Mr Felton had said that it was the defendant’s policy at the time not to terminate unless there was a serious breach, that would have been true. If he had said that it was not the defendant’s normal practice to terminate unless there was a serious violation of the contractual provisions, such as non payment or failure to market, that would also have been true. Indeed, on Mr Felton’s evidence, at that time the defendant’s policy was not even to terminate for breach on the part of a distributor, if that would lead to conflict which, at that time, in the Middle East was likely. Mr Felton accepted that if he had said that the defendant was not going to terminate the Agreement unless there was a severe breach of it, that would have been true, by which I understood him to mean that, if that had been said, it would have reflected the defendant’s current intention. He did not however accept that this was what said.

What was said at the meeting on May 11^th?

The main participants in this meeting were self evidently Mr. Felton and Sheikh Ghanem. I did not hear evidence from Sheikh Ghanem but Mr. Jeitem who translated in both directions was a senior figure with the claimant and could be expected to have a clear grasp of contractual matters, as could Mr. Salah, the claimant’s legal advisor.

Mr. Fernandes, although the means of introduction between Mr. Abbas and Sheikh Ghanem, only played a minor role. He was not articulate in English and appeared in his evidence to confuse the term “breach” with compliance with the contract, which meant that his version of what Mr Felton said was less than clear. He was however, subject to that difficulty, much firmer in his oral evidence than he was in his statement, where he had said that he found it difficult to remember clearly what Mr. Felton had said. He had recalled him trying to appease Sheikh Ghanem “telling him that everything was okay”. “It was along the lines of Jaguar not terminating the Agreement unless Ghanem Holdings breached the contract”. His statement said that, whatever it was that was said, he recalled Sheikh Ghanem being satisfied by the assurances and signing the Agreement.

It was only Mr. Fernandes’ oral evidence which suggested that Mr. Felton had expressly said that the defendant would not terminate the Agreement until the claimant had recouped its investment. In my judgment that cannot have been said, since it formed no part of his witness statement nor of the evidence of Mr. Jeitem or Mr. Salah, who were directly involved in the discussions, where Mr Fernandes, as a more junior person was not. His evidence bore the marks of learned lines, albeit not learned very well, perhaps because of a lack of understanding. I was left with the clear impression that he would not have grasped any nuances in the conversation nor appreciated the difference between the various permutation canvassed as to what Mr Felton said, or might have said. The vagueness of his witness statement is significant and his participation in the meeting was restricted, as compared with the major participants. In the light of the evidence of the other witnesses and Mr Felton’s view that it would have been deceitful on his part to have said anything about non-termination prior to recoupment of investment, I have no hesitation in concluding that, whatever Sheikh Ghanem said about his investment as the reason for not wanting a 12 month, no cause, termination clause, Mr Felton gave no assurances about the defendant not terminating before such recoupment. In my judgment, Mr Fernandes’ evidence was wishful thinking or reconstruction of the kind to which I have referred in paragraph 13 above.

The central issue therefore which I have to decide is whether or not Mr. Felton stated that the defendant would not terminate the Agreement unless the claimant was “in severe breach” of the Agreement.

The claimant submitted that differences between its witnesses as to what was said at that meeting showed that they had not concocted a story between them. For the reasons given, I found Mr Fernandes’ oral evidence unworthy of belief and Mr Jeitem and Mr Salah did say much the same as each other on the critical point. What is however of greater significance is that what they said was inconsistent with the first intimation in the letter of the 15^th June 2007 of what had been said, was inconsistent with the pleaded case in the Particulars of Claim and was inconsistent with what each of them had said in their own witness statements. As already pointed out, the letter of the 15^th of June envisages the possibility of termination without breach. The particulars of claim made recoupment a vital element of the representations alleged. The witness statements of Mr Jeitem and Mr Salah similarly referred to assurances by Mr Felton that there would only be termination for severe breach before the claimant had recovered its investment. This feature was completely absent in their oral evidence in chief when they described the meeting of 11^th May and in cross examination on the subject. That inconsistency is compelling. What it shows is an absence of clear recollection of what was said which is not surprising. Their evidence gave the lie to the claimants case however that the question of recoupment loomed large in the translated exchanges between Sheikh Ghanem and Mr Felton. In his evidence in chief, Mr Jeitem did not even refer to the subject of investment as part of that conversation. It was only Mr Salah who gave evidence that Sheik Ghanem raised his concern directly with Mr Felton about his investment, where upon Mr Felton told him not to worry about it because Jaguar was not going to terminate without ‘severe breach’. No assurance was given however, on the evidence of either, as to the non exercise of the right to terminate prior to recoupment of the investment, despite the content of their witness statements.

It was common ground between the parties that the defendants desired to replace Doha Motors as distributor because of unsatisfactory performance and did so amicably. It was common ground that the defendant wanted a replacement to have available capital to put into the distributorship. The defendant therefore had good reason to encourage the claimant to take on the distributorship and sign the Agreement. The claimant maintained that this was the explanation for the assurances which Mr Felton was alleged to have given.

It is also common ground that there was discussion of clause 18 at the meeting. The reasons for that are not hard to fathom. Self evidently, if Sheikh Ghanem regarded this as a prestige project and was going to spend significant sums of money investing in it, whether with a view to profit or not, he would not want the franchise terminated on 12 months notice, which could be exercised at any time, even immediately. It would be a considerable loss of face to have the distributorship taken away after spending large sums of money, quite apart form the financial loss, if it could not be recouped by a ‘sale and transfer’ to a new distributor. It is common ground that Sheikh Ghanem showed some reluctance to sign the Agreement because of clause 18, the effect of which was explained to him by Mr Salah.

On the evidence I am satisfied that Sheikh Ghanem must have raised the subject of investment as the reason for his concerns about the 12 month no cause termination clause. Whilst Mr Felton had no recollection of that and his evidence was focused on the fact that he could not have said that there would be no termination prior to recoupment of investment, he was aware of the Business Plan and the expenditure contemplated, though to his mind, which he expressed, the Permanent Facilities envisaged constituted an extravagance which should not be countenanced. I find however that there was no mention of a figure of QRs12m or of any figure and that Mr Felton was never told of the price paid to Doha Motors, nor shown the Doha Motors letter of offer, because he did not want to know of such matters.

In these circumstances, as I find them to be, Mr Felton must have sought to offer some comfort to Sheikh Ghanem. Mr Felton would however been clear that there was no possibility of amending the standard form distributorship agreement which the defendant utilised throughout the Gulf region. I find, in accordance with his evidence and that of Mr Salah, that he explained that this was the position. He was not at liberty to depart from that Agreement. For Sheik Ghanem to have been sufficiently satisfied to sign the Agreement, following his expressed reluctance to do so, Mr Felton must have offered some assurance however. He envisaged that the refurbished ‘temporary’ showroom would cost of the order of £400,000 and appreciated that Qatar was not an easy market in which profits could be made. He would have understood any expressed concern about a distributor’s loss of his investment (whatever the amount) and the need for time to develop the brand and increase sales where the uncertainty provided by clause 18 would be unhelpful.

The claimant also relied upon the answers given by Mr Felton in cross examination about the defendant’s policy of non termination of franchises at the time, even for breach, if that might give rise to difficulties. He accepted that if he had said that the defendant was not going to terminate the Agreement unless there was a severe breach of it, that would have been his honest view at the time.

Even with this background, the commercial probabilities militate against the claimant’s evidence. Mr Felton knew that he could not alter the contractual terms of the Agreement and told the claimant so at the meeting. Whilst, as he said, he would be prepared to offer assurance as to the sort of circumstances in which the defendant normally exercised its right to terminate, he would have not have felt able to say anything which would have derogated from the defendant’s right of termination under the Agreement. As he put it, whilst he might not recall exactly what he had said, there were things that he would not have said. He could only give stock answers concerning things he could do nothing about, such as changing the terms of the Agreement. He could not make statements which ran counter to the provisions of the Agreement. All he could do was to say that the defendant would not normally exercise its right to terminate unless there had been a serious breach of the contract such as non payment or failure to market and say that, where there were problems with distributors, the defendant normally sought to work through such problems rather than terminate, as indeed the dealings with Doha Motors showed.

I found Mr Felton to be an entirely honest witness who did not seek to embroider his recollection but gave a realistic and credible account about what he could and could not have said in the circumstances, bearing in mind the defendant’s insistence on their standard form of Agreement and his inability to depart from it, whilst being prepared to indicate the sort of circumstances in which the defendant then currently exercised its right to terminate.

I do not consider there was any real room for misunderstanding Mr Felton’s statements either. If Sheikh Ghanem and the claimant’s witnesses had understood Mr Felton to say that the clause 18 right s would not be exercised or that there would be no termination absent a severe breach, even given the difference in culture, a record of it might be expected. There was no attempt to alter the contract. There was no side letter. There were no notes of the meeting nor any contemporary record to support the claimant’s witnesses’ evidence. Given the presence of Mr Salah, the group legal advisor, at the meeting where the matters were discussed, that is a wholly surprising omission, if Mr Felton had said what it is alleged that he did state.

This position is reinforced by the absence of any reference to such assurances at the termination meeting of the 30^th November 2006 and in the correspondence which followed it. When the first suggestion was made, that some assurances had been given, it was expressed in terms which are not consistent with the allegations now pursued. The letter of the 15^th June 2007 not only failed to identify the very meeting at which it is now alleged that assurance were given but, as I have already pointed out, referred to an expectation gained from what was said, not to a binding commitment and went on to refer to what would happen in the event of termination without cause, and the opportunity to recover the claimant’s outlay, whether from the new distributor who would take over the goodwill and the business or from the defendant itself.

The commercial probabilities, the defendant’s insistence that its rights be governed by the form of distributorship agreement that it used throughout the Gulf, Mr Felton’s clear understanding that he could not abrogate those rights and the absence of any written record at any time of any change in that, including correspondence after termination, all militate against the evidence of the claimant’s witnesses.

Sheikh Ghanem himself did not come to give evidence, which may not be entirely surprising, given his status, but the fact remains that employees were sent to give evidence to the court in support of a case for which there is no supporting material. I find that the evidence of Mr Jeitem and Mr Salah conforms to the pattern to which I have referred to in paragraph 13 above. Mr Felton, whilst owing residual loyalty to the defendant, as a retired former employee, did not, it seemed to me, reading between the lines of one or two of his answers, think much of the defendant’s handling of this termination and was, in my judgment an objective witness, who did his best to help the court. In these circumstances I preferred his evidence to that of the claimant’s witnesses and accepted it, almost in its entirety, excepting only those areas where he admitted that he was wrong and his failure to recall that the subject of investment was specifically raised at the meeting on the 11^th May.

Whatever the defendant’s policy was and whatever incentive Mr Felton had to be shot of Doha Motors and to install the claimant as distributor, Mr Felton knew he could not commit the defendant to any change in its contractual rights under the Agreement and did not do so. He offered sufficient words of comfort about the defendant’s usual attitudes and practice which were sufficient to reassure Sheikh Ghanem so that he felt able to sign the Agreement. Nothing Mr Felton said had contractual force however and there was no misrepresentation of fact, whether it be of intention or state of mind of any kind. Insofar as Mr Felton informed the claimant of the defendant’s usual practice in relation to termination of franchises, he told them the true position. That did not however detract from the defendant’s rights under clause 18.

Reliance

Notwithstanding the evidence of Sheikh Ghanem, it is clear to me that what Mr Felton said was sufficient to give comfort to him, so that he felt able to sign the Agreement. Had Mr Felton made any misrepresentation of fact about the defendant’s intentions or its normal behaviour, I would not have found it difficult to find reliance on the part of the claimant. The reluctance to sign the Agreement was expressed but dissipated by Mr Felton’s assurances. In reality however, this is not a case about misrepresentation, since the claimant’s evidence was of a promissory warranty rather than a misrepresentation of fact and, for the reasons set out above, that case fails.

Conclusion

In these circumstances, the claim must be dismissed and, absent any special circumstances which I am unaware, and upon which the parties can address me, costs must follow the event.