CRS GT Ltd v McLaren Automotive Ltd & Ors

The claimant (“CRS”) is a company in the business of designing, engineering and manufacturing Gran Turismo (or “GT”) series racing cars.

The defendants (“MAL”, “MGL” and “McAllico” respectively) are members of the McLaren group of companies, a leading automotive design, engineering and assembly specialist, producing and selling high performance road-legal vehicles and also GT racing cars. I will refer to the defendants collectively as “McLaren”.

These proceedings concern joint projects between CRS and McLaren for the design, construction and sale of two types of GT racing car, namely, the “GT3 car” and the “GT4 car”, each based upon McLaren road cars. The vehicles contain “carry over” parts from those cars, modified McLaren road car parts and a number of entirely unique parts (the modified and unique parts together being referred to as “non-standard” parts).

There are distinct disputes in respect of the GT3 car and the GT4 car. In relation to the GT3 car, the issue is whether, pursuant to the terms of a formal written contract dated 29 October 2010 (“the GT3 Agreement”) between CRS, McAllico (Footnote: ¹), MGL and Cobra Group

The dispute in relation to the GT4 car is whether CRS has the exclusive right to supply car sets for assembly and to provide aftersales services to GT4 customers, including the exclusive right to sell non-standard parts. However, the parties did not execute a formal contract for the design and production of the GT4 car. A Heads of Agreement (“the HoA”) was signed by CRS and MAL on 3 February 2016, which envisaged that a more detailed, formal contract would be agreed in relatively short order. No such formal contract was in the event agreed, but the project commenced nonetheless. Some sixteen months later, McLaren decided to bring CRS’s involvement in the GT4 project to an end.

CRS’ position is that the HoA was a binding contract in its own right, alternatively that a binding agreement was concluded at some point thereafter by conduct, providing that

McLaren contends that the HoA did not amount to a binding contract and has not become binding by reason of subsequent conduct. McLaren does accept the existence of a number of ad hoc contracts relating to the production of 44 GT4 cars and the supply of 87 sets of GT4 non-standard parts (“the Ad Hoc Contracts”). McLaren further contends that, if there was a contract concluded by conduct, then this did not grant CRS the exclusive right to supply non-standard parts. Finally, if there was a contract providing CRS the exclusive right to supply non-standard parts, specific performance is not an appropriate remedy nor should damages be granted for breach.

McLaren also accepts that, although not pleaded by CRS until late in the day, CRS is entitled to payment for its part in the GT4 project on a quantum meruit or unjust enrichment basis, such payment being in the amounts set out in a business case agreed between the parties and revised on 26 January 2017: indeed, McLaren has been making and continues to make payment to CRS on this basis. CRS applied at the end of its case to amend to add a far wider quantum meruit claim for benefits received by McLaren under the project (including increased value of its brand and increased sales of other cars). I refused that application, save to the extent that the proposed amendment added the claim already accepted by McLaren.

I note for completeness that McLaren pleaded (and pursued) a counterclaim for alleged defective performance of the AdHoc Contracts but abandoned it shortly before trial. The facts

In 2007 Chris Niarchos, the ultimate beneficial owner of the Cobra group of companies and a successful GT racing driver, and Andrew Kirkaldy, another talented racing driver with a degree in engineering, formed a sub-Formula 1 racing team based on a small existing team run by Mr Kirkaldy. In 2009 that team became known as CRS Racing. During that year CRS Racing had discussions with Chris Goodwin, the official development driver for McLaren, about a possible role in the development, design and sale of what would become the new McLaren GT3 car, based on the McLaren MP4-12C road car. In the Spring of 2010, with Mr Goodwin acting as an intermediary, CRS Racing entered into formal discussions with McLaren.

CRS was incorporated on 29 September 2010 as the vehicle which would contract with McLaren. Mr Niarchos holds 50% of the issued share capital of CRS through companies in the Cobra group. The other 50% is held by Mr Kirkaldy and Mr Goodwin in equal shares. All three are directors of CRS and Mr Kirkaldy is the Managing Director.

On 29 October 2010 the GT3 Agreement, extending to some 74 pages (including schedules), was executed as a deed. In outline:

To facilitate the above arrangement, McLaren:

However, the above agreements and restrictions were subject to “Exclusivity Exceptions” as follows:

“3.5.2….Provided that McLaren shall have the right to grant such third party licence or to undertake such activities itself (but excluding racing): (i) in preparation for McLaren entering into a replacement for CRS in circumstances where McLaren reasonably believes this Agreement will terminate prior to the expiry of the Contract Period or within 12 months prior to the expiry of the Contract Period; or (ii) in circumstances where McLaren wishes to commission a new GT related project for a vehicle that is different to the GT Car and the parties are unable to agree commercial terms for such project (“Exclusivity Exceptions”).

The key provision in the GT3 Agreement, for present purposes, is clause 4.5.3, which reads as follows:

“4.

CRS’ Obligations

…

4.5

Sale and Purchase of GT Car

…

Clause 4.5.3 All after sale service and post sales customer interface shall be the responsibility of CRS including without limitation the Customer Services and Support and the provision of such parts and services after the expiry of this Agreement for period in accordance with market norms.”

CRS agreed that the GT3 project with McLaren would be their sole business:

“5.1

Business of CRS

CRS agree with McLaren that the design, development, manufacture and sale of the GT Car and the delivery and sale of track support for the GT Car, spares packages for the GT Car, repairs of the GT Car and update packages for the GT Car will at all times be the sole business of CRS.”

Specific provision was made for tooling during “the continuance of this Agreement” as follows:

“Tooling 7

7.1

In order to fulfil its obligations under this Agreement, CRS shall acquire for its own account such items of capital equipment, plans, moulds, jigs, fixtures and templates that are created specifically to enable individual components to be manufactured/modified for the GT Car (“Tooling”). Tooling shall also be deemed to include such items purchased in respect of the creation of spares and update packages for the GT Car.

7.2

CRS acknowledges that it has no property, interest or other rights in the Tooling and that full title in the Tooling vests in McLaren. CRS shall take all such acts and execute all such documents as may be required to ensure that full title in the Tooling vest in McLaren. Further, CRS shall not create any Encumbrance over any Tooling or transfer title in any Tooling to any third party whatsoever. All Tooling is in the possession or control of CRS as a bailee of McLaren on condition that:

7.2.1

McLaren shall not interfere with CRS’s possession or control of the Tooling during the continuance of this Agreement;

…”

Clause 8 provided that existing Intellectual Property Rights would remain the property of the owner at the commencement of the GT3 Agreement, but that all such rights created by or on behalf of CRS in carrying out the project would be owned by McLaren and CRS would take any steps necessary to assign such rights to McLaren.

By the end of the 2011 racing season, all activities of CRS Racing (including Ferrari GT and single-seater racing programmes) had ceased at McLaren’s request. Mr Kirkaldy similarly gave up his career as a professional racing driver. The sole remaining business was the design, development, manufacture, sales and associated aftersales support activities carried on by CRS under the McLaren GT brand.

GT3 Aftersales Services were (and are) primarily made available to GT3 Car Owners through a dedicated “owner’s page” website (the “Portal”). Orders for GT3 parts are placed through the Portal and it offers customers access to information at all times.

The GT3 Agreement duly expired at the end of the Contract Period, namely, 31 December 2016. Certain rights and obligations, however, continued beyond the Contract Period. The dispute in respect of the GT3 Agreement, as explained above, relates solely to the nature and extent of CRS’s post-expiry rights.

By the end of the trial it was common ground that there were 14 GT3 cars still racing in 2018, down from 21 the year before.

In 2011 McLaren launched its “track experiences”. Later that year, McLaren requested CRS’s assistance in running these events. CRS did so by supporting the ‘Pure McLaren’ programme at Goodwood and continued to provide assistance throughout 2012. There was no formal agreement for this project, CRS simply invoicing MAL against purchase orders.

In 2012 CRS also developed a special edition of the GT3 Car, the 12C GT Can-Am Edition, this being a car to be used on private “track days” rather than being entered in races. In late 2012, at McLaren’s request, CRS moved its headquarters from Coalville, Leicestershire, to Woking, Surrey, also the location of McLaren’s own headquarters, known as the McLaren Technology Centre.

In 2013 CRS developed a new track car called the 12C GT Sprint. CRS also took greater responsibility for and expanded the Pure McLaren track day programme. CRS developed the 12C Sprint and the track day programme without any formal agreement.

In November 2013 CRS and MAL commenced work on the design and development of the P1 GTR car, this being a track derivative of the P1 road car and MAL’s flagship project. MAL outsourced the design and development of the car to CRS, including the production of tooling and the supply of some parts, but built and sold the cars itself. Aftersales, however, were carried out by MAL. CRS’s involvement in the P1 GTR project was carried out pursuant to a detailed written contract. The written contract, dated 3 June 2014, was entered into after work commenced and had taken around five months to be concluded. Described as a “Development Services Agreement”, it was 42 pages long, including schedules, and was similar in structure to the GT3 Agreement. In particular, it included the same or similar provisions in relation to intellectual property rights as had been set out in the GT3 Agreement.

CRS later developed a 650S Sprint Car, this being a further evolution of the GT3. Again, this was done without there being any formal written contract.

In early 2015 McLaren and CRS discussed the potential development of a GT4 car with two variants: a track day version of MAL’s 570S road car (known as the P13) and a racing car designed for competing in the GT4 race series. A concept paper was produced by CRS in May 2015. Further discussions about the project took place between Paul Mackenzie, an Executive Director of MAL, and Mr Kirkaldy and Daryl Cozens, Commercial Director of CRS.

In September 2015 CRS began work on designing a concept test car (referred to as a “mule” car) and, on 27 October 2015, produced an outline of that programme for Mr MacKenzie, quoting a total price of £164,459 plus VAT. It is common ground that MAL agreed that price and in due course paid it. The mule car was thereafter developed, built and tested, leading to a successful “Exec Test” by MAL on 27 November 2015.

On 6 January 2016 Mr Kirkaldy sent an email to Mr Flewitt, the CEO of MAL, following a telephone call between them two days earlier. Under the heading P13 GT4/One Make, Mr Kirkaldy stated:

“We are now at the stage with the P13 track car of having a solid design base and understanding to move forward and create a very impressive product aimed at the right price bracket. CRS have offered to share in the development costs with this project in order to share in the profit and ongoing business generated by the P13 track car and its variants. Following various discussions I believe the highlight[s] of the partnership are:

1.

[MAL] and [CRS] share the development costs of 2.1 million as set out previously

2.

[MAL] guarantee a return to [CRS] [of] the investment plus interest (previous discussion was around 1.3M) over the three years via car sales

3.

The profit of the car is shared 50/50 between [CRS] and [MAL]

4.

The aim is to receive a profit of £25k per car to both [CRS] and [MAL] with a [Bill of Materials] of 80k and a sale price of 150k plus taxes…..”

Mr Kirkaldy further set out some ideas, which had not yet been discussed, including that:

“CRS GT would like to supply all non-standard parts of the build of the cars as sole supplier as well as being the supplier of all non-standard parts to the aftermarket”.

The email went on to state:

“It was discussed at our meeting in December that the goal would be to try and get to a commercial agreement based on the above in our Thursday meeting. We can then have an email confirming basic terms and continue with the project straight away in order to meet the timings required to achieve the above ideas and goals. The lawyers can then work on a contract to cover all elements to cover the terms of the project.”

A meeting was held on 7 January 2016 between MAL (Mr Flewitt and Mr Mackenzie and others) and CRS (Mr Kirkaldy and Mr Cozens) at which the GT4 project was discussed. Mr Kirkaldy reported back on this meeting to Mr Niarchos (and others) by email on 11 January 2016 as follows:

“2.

P13 GT4/One Make

This is the most urgent of all the projects as it is started. There was a lot of talk but I will just give you the basic points or I will be here all day.

a)

It is agreed that we will fund the development 50/50 and share the profit 50/50 …

….

c)

It is agreed we should have all profit from parts sales that are not standard parts (ie wheels, hubs, front bumper etc…)

…

g)

It is proposed that all parts sales go through [CRS]. This is a more difficult one and probably the one that will take the most time to agree.

h)

Mike made it clear that a document that we can both sign needs to be agreed within two weeks of the meeting.

i)

I made it clear that the project need [sic] to continue during this period. It was agreed that a figure would be given to MAL so that in the event that the project cannot be agreed that amount would be paid to [CRS].

j)

Mike believes the contract period needs to be 4 years with ongoing parts supply beyond this period.”

Mr Kirkaldy insisted, when cross-examined, that his proposal in point g), that all part sales go through CRS, was that even McLaren’s dealers would have to source unique and modified parts from CRS. He insisted that he was not suggesting that it would be difficult to persuade McLaren that CRS should otherwise be the exclusive supplier of those parts to customers.

The next day, 8 January 2016, Mr Mackenzie provided a first draft heads of agreement, based on a presentation CRS had made on 3 December 2015, under cover of an email to Mr Cozens stating “It’s started!”.

Three further drafts were then produced as a result of negotiations between the parties. On 26 January 2016 Mr McKenzie circulated the last of these drafts for “final comment”, including to MAL’s head of Legal, Ruth Nic Aoidh, and others in the legal department.

In his fourth witness statement (§72), Mr Kirkaldy stated that:

“It was agreed between myself, Daryl Cozens and Paul Mackenzie that we needed a robust short agreement (i.e. the HoA) that could later be expanded. CRS needed the short form, binding agreement in place before we could commit to any further development work.”

Mr Kirkaldy went further when cross-examined, stating that he had expressly agreed with Mr Mackenzie (who is no longer employed by McLaren and was not called to give evidence) that the HoA would be binding and further confirming that CRS was holding back on doing any further work until the HoA was signed.

However, Mr Kirkaldy did not mention any such express oral agreement with Mr Mackenzie in his witness statement in support of CRS’s application for a without notice injunction, and no such agreement was pleaded at any time. It is not referred to in any contemporaneous document, and is inconsistent with the content and tenor of Mr Kirkaldy’s email to Mr Flewitt of 6 January 2016 (above), his email to Mr Niarchos and others of 11 January 2016 (above) and his subsequent communications set out below. Whilst Mr Cozens gave evidence that he believed the HoA would be binding, he did not suggest that that had been specifically agreed with Mr Mackenzie. It is no doubt for those reasons that Mr Kirkaldy evidence in that regard was not relied upon by CRS in closing argument in support of its contention that the HoA was binding. I reject that evidence, considering it to be a belated attempt to bolster CRS’ position, perhaps encouraged by the fact that Mr Mackenzie was not giving evidence and so would not be able to rebut the suggestion.

Mr Kirkaldy’s evidence that CRS was waiting for the HoA to be signed before continuing development work is also difficult to accept given that he himself told Mr Niarchos on 11 January 2016 that the GT4 project was most urgent because it had started. It is also evident from his email of 6 January 2016 to Mr Flewitt that Mr Kirkaldy was keen to continue with the project as soon as possible, requiring no more than an email confirming “basic terms”, whilst the lawyers negotiated a “contract”.

The final version of the HoA was dated 3 February 2016 and signed by Paul Mackenzie on behalf of MAL and Mr Kirkaldy of CRS. The document, in the form of 25 presentation slides, was headed “Sports Series SPRINT Development Programme, Heads of Agreement”. P13 SPRINT was the original name of the GT4 car, and a SPRINT version (more powerful than the basic GT4) was developed as the project progressed.

The “Project Summary” (slides 3 and 4) included the following:

“The aim is to produce a track only Sport Series vehicle running on slick tyres.

Through a single program three variants will be developed and signed off:

•

Base Vehicle (non-aero)

•

GT4

•

Single Make

The Base vehicle will be the introduction model aimed at the track day market and have a target sales price of ˂£150k + taxes

(ex-works). The ‘GT4’ and ‘Single Make’ will be the base model optioned up. The table overleaf provides an overview of the content of the three variants. To achieve the sales price of the base vehicle, £80k bill of materials is necessary and therefore is the target.

CRS will develop the vehicles under the engineering supervision and sign off of MAL. The production vehicles will be built in MPC [the McLaren Production Centre] by MAL and the vehicles will be marketed and sold through the MAL dealer network by MAL.

CRS will support the customers in the aftermarket with parts supply, manuals and operating instructions using its online portal.

The aim is to get a vehicle running at Pure and P1 GTR events in early summer and the team to be running a GT4 variant this season supported by McLaren GT.

The project has been calculated on an assumed volume of 100 vehicles over 3 years. (however our target should be to sell ˃150 vehicles over the 3 years spread across the track day, GT4 and single market variants).

It is assumed that 30 vehicles will be built and sold in 2016.

……

CRS will operate under the ‘McLaren GT’ banner for all operations in relation to this programme... ”

The “Timing” of the project was stated to be as follows (slide 6):

“A development mule demonstrator vehicle was built in 2015. An MAL Exec drive assessment was successfully held in December.

Following the signoff of these heads of agreement, the full development programme will kick-off. The engineering and development programme will be approximately 6 months, with engineering signoff planned for early August.

The first batch of production vehicles will commence build in late September.

The high-level plan, including gateways and the major development activities is shown overleaf.”

Under the heading “Manufacturing Overview”, slide 11 provided:

“All prototype build activity will be carried out by CRS at Unit 22.

The production vehicles will be built by MAL in MPC, however some elements of the build such as the addition of the roll cage may need to be carried out by CRS.

Total project volume assumption is 100 cars over 3 years.

Yearly projected volume:

2016

– 30

2017

– 40

2018

– 30

SOP – Late September 2016

Build rate – 1 per day, with vehicles built in batches of 10.

CRS will be the Tier 1 supplier for the unique parts.”

Under the heading “Customer and Aftersales Support”, slides 15 and 16 included the following:

“All customer service and support will be provided by CRS, with support of MAL when necessary.

The service will be run on CRS’s ‘Customer Support Website’.

The site will be refreshed in 2016 to complying with MAL latest corporate & brand guidelines and will be branded ‘McLaren GT’. The site will cater for all CRS’s McLaren models (GT3/Sprint/SS Sprint).

…

Parts support:

• Spare parts available from CRS:

Standard MAL production parts supplied by CRS, however sourced from MAL aftersales Unipart (pricing structure to be agreed):

Unique Sprint parts sourced by CRS (pricing structure to be agreed).

………

CRS will continue to provide customer support (including parts availability) for a minimum of 3 years after the last Sports Series SPRINT has been built.”

The “Financial Model”, more often referred to by the parties as the Business Case, was described in slide 18 as follows:

“The financial model has been based on a pre tax price of £150k (the price includes a 14% dealer margin), however the aim should be to reduce the sales price to less than £150k.

Both CRS and MAL will contribute to the Development and Engineering phase of the project as set out in the financial model.

MAL supplier costs are contained within the MAL D&D [Design and Development] budget.

The CRS element of the D&D is fixed.

It is agreed that CRS will made a return of £300k on its upfront investment.

The investment (including CRS’s additional £300k) for both parties will be paid back on the sales of the first 75 vehicles.

Vehicle sales beyond 75, the profit will be split 50/50 between MAL and CRS.

CRS will supply for production the unique parts at cost, an indirect production support provision has been included in the model.

MAL will endeavour to return £22k per car to CRS from job 1 to support their cash flow requirements.

The model overleaf is the working assumption, it will be refined and finalised as part of the final contract.”

Slide 19 set out details of the Financial Model (sometimes referred to as the Business Case) as summarised above.

Slides 22 and 23 set out a “RASIC” schedule, identifying which party was responsible (being defined as “those who do the work to achieve the task”) or accountable for a particular task and whether the other party was “supporting”, or was to be “informed” or “consulted”. CRS was to be “responsible” for parts supply for both standard production parts and unique parts, whilst McLaren was to support supply of the former and be informed of the latter.

The final slides (24 and 25) were headed “Commercial” and provided as follows:

“This Heads of Agreement covers all known project requirements at this point in time, the aim is for both parties to sign the document by the end of January to enable the development and engineering programme to start.

Following the signing of the heads of agreement by both parties and the starting of the development and engineering programme a formal contract will be prepared for signature, the aim will be to have this complete by the end of March 2016.”

On 22 February 2016 Mr Niarchos wrote to the Cobra relationship manager at Lloyds Bank to inform him of some good news, namely, that MAL was:

“…ready to sign 4 new contracts with us for the coming years. This includes the following:”

…

3.

A new contract to produce a GT4 version of the 570S. This will include a minimum of 50 units and potentially up to 150 units! Although they will be built on the line we will be splitting the profit on the car 50/50 and we will make all the profit on parts supply. This car is to be sold via the dealer network and will be part of their inventory so the sales of the car will be assisted by us but not entirely our responsibility as was before.”

As that letter was written nearly three weeks after the HoA was executed, the reference to McLaren being ready to sign a new contract in relation to the GT4 project appears, on the face of it, to be to the signing of a formal contract, anticipated in the HoA to be finalised by the end of March 2016. When cross-examined, however, Mr Niarchos insisted that he did not know on 22 February 2016 that the HoA had been signed nearly three weeks before. Mr Kirkaldy supported that position when he was cross-examined, asserting that, although he could not remember when he told Mr Niarchos that the HoA had been signed, it was about three weeks after the event. If it is true that Mr Niarchos had not been told about the HoA, that suggests that Mr Kirkaldy did not consider the signing of the HoA to be the “champagne moment” it would undoubtedly have been if it had been a binding agreement. That conclusion is not relevant to an objective assessment of the parties’ intentions in relation to the HoA, but it further undermines Mr Kirkaldy’s evidence of an earlier oral agreement with Mr Mackenzie that the HoA was binding.

Following the signing of the HoA, the parties engaged in negotiation of the formal contract. Ansar Ali, who had joined MAL shortly after the HoA was signed as Motorsports Director, took charge of the process on behalf of MAL.

By 11 April 2016 Mr Ali had sent draft appendices for the formal contract to CRS and, on 27 April 2016, following discussions with Mr Cozens, sent to him and Mr Kirkaldy version 4 of those appendices. Mr Cozens confirmed the same day that, subject to two minor points, they were acceptable to CRS.

On 3 May 2016 Mr Ali sent two draft agreements to Mr Kirkaldy and Mr Cozens; a draft Services Agreement and a draft Development Services Agreement. These had been prepared by MAL’s legal department. The former was marked “Subject to

On 20 May 2016 Mr Cozens informed Mr Ali by email that it was necessary to change the structure, so that there would be three separate contracts. He also provided some general comments, in particular that the draft agreements did not recognise that CRS had invested in the project and that it was a joint programme/collaboration. He also indicated that there was “quite a lot to finalise surrounding production parts supply...”.

Mr Cozen’s evidence was that Mr Ali accepted his suggestion of a three-contract structure in July 2016. On 4 August Mr Cozens sent three drafts to Mr Ali: a re-draft of the Development Services Agreement, an Agreement for the Provision of Services (Supply of Components) and an Agreement for the Provision of Services (Sales & Support). The latter two drafts retained the “Subject to Contract/Contract Denied” marking used by McLaren. All three drafts had been produced with the support of CRS’s solicitors and there were significant changes compared to the earlier drafts. In particular, paragraph 3.5 of Schedule 1 (Statement of Work) to the draft Agreement for the Provision of Services (Supply of Components) provided:

“3.5

CRS shall be the exclusive supplier of Components to McLaren. McLaren shall have no obligation to purchase any Components from CRS pursuant to this Agreement except as expressly set out in Clause 2.1. McLaren shall also have the right during the term hereof to acquire any products or services from any third party. CRS shall not supply the Components to any person other than McLaren and McLaren’s approved agents except it is agreed that Components that are shared with othervehicles manufactured, sold and/or supported by CRS cancontinue to be sold/supplied to third parties.”

Schedule 4 of the draft Development Services Agreement stated that “All customer service and support for all variants will be provided by CRS with the support of MAL when necessary.”

Mr Cozens chased Mr Ali and others at McLaren for a response during October and November 2016. He chased again on 14 December 2016, this time addressing his email to Dan Walmsley, the new Head of Motorsport at MAL. Mr Ali had been promoted to Managing Director of McLaren Special Operations (MSO) in September 2016.

On 7 May 2017 Mr Cozens sent Mr Walmsley updated versions of the three draft agreements, and sent revised versions on 9 May following a meeting that morning. In the revised versions, Mr Cozens added the word “exclusively” to the obligation of CRS to provide customer service in respect of the GT4 cars.

Thereafter no further progress was made in the negotiations.

In the meantime, the parties proceeded to design and develop the GT4 car. It was common ground that CRS carried out work, using the McLaren GT name, as contemplated by the HoA, namely:

CRS also purchased, at cost price, a GT4 car. The HoA provided that CRS was entitled to purchase up to five GT4 cars at cost price.

The notes of an internal MAL meeting on 11 April 2016 record that there was a question as to whether, as anticipated in the HoA, the GT4 cars could in fact be assembled on McLaren’s production line, the main issue being roll-cage fitting. The contingency plan was for CRS to assemble the cars and CRS had been asked to investigate the commercial implications of that plan.

On 19 April 2016 Mr Niarchos emailed Mr Flewitt, expressing concern that McLaren had not paid sums due to CRS for the development of the GT4, pointing out that “we are 100% beholden to McLaren and have no other sources of income”. Mr Flewitt responded on 3 May 2016, stating that MAL understood that there was an agreement that the balance of money due to CRS from MAL would be paid out of deposits for GT4 cars and that MAL had already contributed 4 cars and £300,000. Mr Flewitt also expressed surprise at the tone of Mr Niarchos’ email, pointing out that MAL was “actively working to support

In due course McLaren did pay £785,000 to CRS following an internal recommendation by Mr Oliver Jones of MAL’s finance department. The relevant email, dated 12 May

By 19 April 2016 it had also been agreed that CRS would assist with selling the GT4 cars, contrary to what was envisaged in the HoA.

In about May 2016, the first orders for GT4 cars were accepted from customers. Mr Ali had agreed with Mr Kirkaldy in March 2016 that the Recommended Retail Price for the GT4 would be £159,900 and had discussed a set of sales terms with Mr Cozens in March and April 2016 and subsequently agreed them.

In the summer of 2016 the project encountered difficulties and delays. There were problems releasing CRS’s designs of parts onto MAL’s system and the Bill of Materials (BOM) was incomplete, in part due to MAL’s migration to SAP management software. On 13 June 2016 MAL decided to move the Start of Production (SOP) date from 26 September to 31 October 2016.

It is common ground that at some point (not specifically identified in the evidence) CRS agreed that it would build the first 21 GT4 cars at its premises, in addition to the two prototypes.

In September 2016, however, CRS indicated it would not place orders with its suppliers for unique parts absent a commitment from McLaren to a minimum of 100 parts. CRS stated that, without such a bulk commitment, their supply chain would not honour the prices then quoted. McLaren, however, was providing order cover for lower quantities, consistent with the build plan.

In mid-September 2016, when it became apparent that only between 9 and 20 GT4 cars would be produced in 2016 (as opposed to the planned 50), there was a difference of views between Mr Niarchos and Mr Flewitt as to where the blame lay for that deficiency. On 22 September 2016 Mr Flewitt emailed Mr Niarchos, stating:

“The key issue is unique parts availability and we contracted and paid CRS to develop the car, design, release and source unique parts; this is considerably behind plan and I am now having to support with considerable MAL resource to recover any volume this year. This disappointing position is part of why I mentioned to you we need to evolve to a place where we do what we do best; frankly we should not have contracted CRS to do this, we should have done it ourselves and will progressively need to take it inhouse to protect the program.”

Mr Flewitt stated in his witness statement that he was not referring to having contracted with CRS in the sense that there was a legally binding contract, a position he maintained when cross-examined. It was suggested by Mr Chapman QC, on behalf of CRS, that Mr Niarchos, in his witness statement, had given evidence that he understood Mr Flewitt to be confirming the existence of a contract (and that he had not been challenged in that regard when cross-examined). I do not, however, read paragraph 83 of his statement in that way: Mr Niarchos asserts his current view that Mr Flewitt accepted that there was a binding contract, but says nothing as to his understanding at the time he received the email, let alone that he placed any reliance on that understanding.

Mr Niarchos replied to Mr Flewitt later on 22 September 2016, asserting that the problem was MAL’s fault:

“Clearly there are serious communication problems as I am told it is the other way around! I have been told it is the lack of order processing by MAL which is why we can not process the orders…””

On 28 September 2016, Mark Darby of McLaren sent an email to, amongst others, Mr Ali, referring to a project meeting with CRS. That email stated:

“In the project meeting today GT have stated that they are not accepting any blanket orders until we have a contract in place that states we are committing to a minimum of 100 parts, apparently this is a conversation had between Ansar and Daryl, Ansar

Please could you confirm this is your understanding and where we are at with the contract please.”

A series of purchase orders was issued by MAL in respect of 100 brake discs, brake pads, wheel safety parts, fuel cell assemblies and 40 wheel nuts. The order date on the face of all of these but the fuel cell assemblies order is 07/11/2016, although the due date for the components was 9/9/2016.It is not necessary to resolve the reason for the apparent discrepancies in these dates.

It appears that CRS may have started production of the first 21 cars as early as 24 October 2016. Subsequently (again on a date which is not recorded), CRS agreed to build more GT4 Cars in the first quarter of 2017. The number of vehicles to be manufactured by CRS was increased to a total of 44. Manufacture was completed on 27 November 2017.

On 28 October 2016, Mr Cozens sent an email to Mr Ali (with Mr Kirkaldy copied in). This stated:

“Hi Ansar

As requested I have listed out the action points that I noted/recall from our meeting yesterday, all P13 GT4/Sprint related unless specified.

Ansar/MAL Actions

…

Push legal to get all three agreements completed in November – now critical.”

On 31 October 2016, Mr Cozens emailed Dave Eden of McLaren (copying in Mr Kirkaldy and Mr Ali):

“I appreciate you are busy with dealers right now but I would appreciate some indication of when/how we can progress the P13 agreements. I met with Ansar last Thursday to stress how super critical this is, no doubt you will be aware.”

On 3 November 2016 Mr Cozens emailed Mr Jones, seeking urgent confirmation that MAL would cover invoices for various parts and would pay car assembly fees and logistics fees sought by CRS. The next day Mr Cozens informed Mr Ali that he had sought that confirmation.

On 7 November 2016 Mr Ali responded to Mr Cozens as follows:

“As discussed I know CRS is now building the GT4s and that we have not formally agreed commercial terms between us.

In the meantime, let me respond to your points below...”

Mr Ali proceeded to agree that MAL would pay for 5 car sets of CRS unique parts at £58,750/unit plus VAT and, in relation to the CRS’s work in building cars, would pay fees of £4,944 per unit for direct labour costs (refusing to cover the production overhead of £930 per unit) and £2,596 per unit by way of a logistics fee. Both sums were payable upon “Final OK” by McLaren.

When cross-examined, Mr Ali accepted that his reference in his email of 7 November

It is common ground that, at some point during the Autumn of 2016, MAL placed an order for CRS to provide 47 “car sets” of GT4 parts/assemblies to MAL, although there is no record of the order.

As of December 2016 the parties had not agreed the price at which CRS would purchase the GT4 standard parts from MAL (through MAL’s supplier, Unipart). Mr Kirkaldy’s position was that it had been agreed that CRS would pay cost plus 10% to MAL. CRS was actually paying wholesale price with a 30% discount to Unipart, Unipart purchasing the parts from MAL at cost plus 5%.

On 26 January 2017 McLaren and CRS agreed to revise the financial model set out in the HoA so as to reflect the fact CRS had built, and continued to build, the GT4 cars and the overrun on design and development costs (the “Revised Business Case”). CRS immediately issued an invoice for £177,409.21 plus VAT based on the Revised Business Case and thereafter were paid in accordance with the Revised Business Case.

On 7 March 2017 Mr Kirkaldy emailed Mr Ali, referring to a meeting the previous week with Mr Flewitt and Mr Ali:

“I asked about how we could get the contract for the GT4 moved forward quickly as it is becoming a problem for my shareholders. You stated that the legal team have been very busy with the legal side of the motorsport dealers and I understand that. Mike then asked if there was a way to create even a simple contract to help in the interim. My view here is that the original contract we negotiated is well on the way towards being agreed and should be able to be sign [sic] pretty quickly. Can I ask that this is moved forward as a fairly urgent step from our side.”

That email appears, on its face, to have been a clear recognition by Mr Kirkaldy that the HoA was not a binding agreement and that no such agreement was yet in place, but was “well on the way to being agreed”. When cross-examined about this email, Mr Kirkaldy gave, for the first time, a different explanation of why he did think it necessary to sign an interim contract, stating:

“…I said to Mike Flewitt that we already have an HOA and there was a contract that was agreed – there didn’t seem any point in coming up with another agreement where we were already, as far as we were concerned, in agreeance on the more detailed contract that we had just spoken about.”

I do not accept that that was the nature of Mr Kirkaldy’s conversation with Mr Flewitt, nor that that was what Mr Kirkaldy had in mind when he wrote the above email. As Ms

Mr Walmsley’s evidence, in paragraph 46 of his witness statement, was that he remembers at least two distinct occasions in March of April 2017 when Mr Kirkaldy explicitly acknowledged that there was no contract in place between MAL and CRS in relation to the GT4 project. He stated:

“At that time, I was typically meeting with Mr Kirkaldy on a weekly basis to discuss various aspects of the GT4 project requiring attention. At one of those meetings, he noted that it would be unwise for CRS to renew its lease of the premises it was occupying at Unit 22 Woking Business Park at a time when it did not have a contract in place with MAL. At another of those meetings, Mr Kirkaldy referred to certain challenges CRS was facing with its bank due to the fact that it did not have a contract in place with MAL for the GT4 project. I do not recall Mr Kirkaldy’s exact words, but I believe that he mentioned an overdraft facility that CRS was attempting to increase with some difficulty.”

Mr Walmsley maintained that evidence when cross-examined and I accept that his recollection was accurate. His account of Mr Kirkaldy’s concerns is also consistent with what Mr Kirkaldy’s stated in his email of 7 March 2017 (and further contradicts Mr Kirkaldy’s oral evidence in that regard) and with concerns expressed by Mr Niarchos as set out below.

On 28 March 2017, Mr Niarchos and Mr Flewitt met for lunch at MAL’s offices. The future relationship between CRS and McLaren was discussed, and Mr Flewitt was introduced at the end of the lunch to Mr McIntosh, the new CFO of CRS, and to Mr Hogg of Cobra. Mr Niarchos emailed Mr Flewitt the next day, purporting to record the issues discussed. So far as is material, the email provides:

“1.

570S GT4

Anticipated total volume of production now expected to be in the range of 300-400 cars during total production run over 4 years.

150 cars this year and the rest in the following 24 months. Obviously the volumes will trail off in years three and four.

You felt there were issues that MGT did not necessarily provide the level of build spec required by MAL so the car could be line built successfully.

2.

650S GT3

This project is ongoing and the contract is still in place.

…

4.

Contracts

1.

As we discussed the lack of contracts is having a very negative effect on MGT. The fact is we can not get any bank support without them and that has a dramatic effect on cash flow.

2.

Additionally the issue then has a domino effect elsewhere.

1.

The lease. It is difficult for me to commit to a new lease and its commitment level without having security of future business. I know we can not always estimate exactly the level but the lack of any contracts leaves us in a very difficult situation.

3.

We will both make sure that the contracts get resolved quickly. I will ensure that there are no outstanding issues on our side that are holding them up.

…

6.

Future Business

I am obviously really happy to hear that we are looking at the future from the same perspective. That MGT will continue to provide project development to MAL for future projects and that we will strengthen the relationship through better communication of both companies.”

On the face of that email, the reference in paragraph 4 to a lack of contracts and there being no security of future business plainly includes (and relates primarily to) the GT4 project. In paragraph 89.6 of his witness statement Mr Niarchos stated that this was a reference to the fact that, as the HoA provided that it would be followed by a more detailed agreement, CRS’s bank had asked for that further agreement. However, subsequent correspondence between CRS and Lloyds Bank in August 2017 strongly indicates that the bank had not seen the HoA at that date and was unaware of its terms, Mr Kirkaldy and Mr McIntosh being concerned about showing it to the bank as it would not be understood. Mr Niarchos accepted in cross-examination that he had not considered that correspondence when making his statement.

In fact, during his cross-examination Mr Niarchos suggested that the reference to lack of contracts causing a problem did not include the GT4 project (in respect of which he insisted that there was a binding contract in place in the form of the HoA), but related only to “future contracts” for other projects. But he did also suggest, somewhat confusingly, that the reference did include the absence of a formal signed contract for the GT4.

I have no hesitation in rejecting Mr Niarchos’s attempts, both in writing and orally, to finesse the plain meaning of his email. He was undoubtedly recording his statement to Mr Flewitt that the absence of binding contracts between CRS and McLaren in relation to projects, including the GT4 project, meant that CRS did not have any security of future business, causing CRS financial difficulty.

Mr Flewitt responded on 4 April 2017 as follows:

“We discussed a number of items but the most important is to clarify the services MAL will require going forwards, to give you visibility of our plans and enable the best decisions to be made by you on behalf of CRS.

To do this I suggest we schedule a meeting and I will present our proposals for the continuation of P11 GT3, P13 GT4 and Sprint and P14 GT3…. It is also important to clarify that all future business will be put to tender and all options considered by MAL”.

On 20 April 2017 Mr Walmsley wrote to Mr Cozens, placing an order with CRS for a further 40 car sets (making 87 in all). That letter was in fact drafted by Mr Cozens and emailed on 19 April 2017 to Mr Walmsley to be signed and returned. Mr Walmsley did so, changing only his title at the foot of the letter. The document stated as follows:

“The MAL purchasing team will issue standard SAP system purchase orders for 40 car sets of parts of/assemblies however for the avoidance of doubt this letter confirms MAL’s full commitment to purchase/take delivery of the full 40 car set parts/assemblies in 2017. As agreed in the P13 Agreement CRS will supply the parts/assemblies to MAL at cost price.”

CRS places great emphasis on Mr Walmsley’s reference to “As agreed in the P13 Agreement”, suggesting that this was an acknowledgement that the HoA was or had become a binding contract, upon which it relied by accepting the order. In my judgment, however, the letter was drafted by Mr Cozens in the terms set out in order to make it entirely clear that the order for a further 40 car sets was a binding legal commitment by MAL, precisely because of the difficulties CRS was experiencing due to the lack of a binding contract in relation to the project more generally.

The parties arranged a major meeting for 18 May 2017 to discuss their future relationship, setting aside half-a-day and involving numerous executives on either side.

On 13 May 2017, in anticipation of the meeting Mr Flewitt sent an email to Mr Walmsley in which he stated that:

“[I] do not want to extend our relationship with CRS, i will honour our financial commitments for P11 and P13 and we have a contract and precedent for P11 that i will honour. I want us to move to the new operating relationship with our dealers, customers and CRS as soon as we can.”

The day before the planned meeting, 17 May 2017, Mr Ali and Mr Walmsley met Mr Kirkaldy and Mr Cozens. That meeting was recorded in separate internal emails by Mr Cozens and Mr Walmsley, both of which are accepted as accurate accounts. Mr Cozens email to Mr Kirkaldy and Mr Niarchos recorded the following:

“2.

P13 GT4

a.

All sales leads passed to MAL or dealers with immediate effect

b.

MAL would like to take over Tier 1 supply from Jan 1^st 2018

c.

MAL would like to take over all customer support including parts supply from Jan 1^st 2018

d.

MAL would continue to pay profit share on all cars sold until end of production.

……..

5.

McLaren GT Brand

a.

CRS would be allowed to use the MGT brand until year end 2017

b.

The MGT brand would be discontinued at the end of 2017 and MAL would undertake all motorsport activities under the ‘McLaren GT Motorsport’ brand…”

Mr Walmsley’s email to Mr Flewitt, Ms Nic Aoidh, Mr Ali and others recorded the following:

“Ansar and I have just met with Andrew Kirkaldy at CRS GT who also invited Daryl Cozens to join us. Andrew was informed of our intentions around the four key headlines of P11 GT3, P13 GT4, future motorsports projects and the McLaren GT brand.

The meeting was in the main business like and relatively unemotional. In the main two key resistances were voiced by Andrew.

The first was on ownership of IP relating to the P11 GT3 car. Andrew’s claim is that the IP is owned by McLaren Group and that the IP for the 12C GT3 is owned by CRS. We offered no comment or argument to his assertion.

The second resistance was around the Heads of Agreement on P13 GT4, most notably on the rights to the aftersales and customer support elements. In Andrew’s view he sees the document as a legally binding contract. Again we made no comment.

Future motorsport projects and McLaren GT branding intentions were also conveyed and nothing material was raised by Andrew in the meeting itself.

He has now spoken to Chris Niarchos and advises that they only require one hour for a meeting, with Andrew Kirkaldy and Chris Niarchos representing CRS. He has requested that the meeting commences at 12:00. I will ask Susie to make the necessary arrangements.

I have attached the latest version of the document we have been working on; please advise of amends to the content based on these positions.”

On 18 May 2017 CRS informed McLaren that Mr Kirkaldy and Mr Niarchos would not attend the meeting planned for that date.

On 26 May 2017, Mr Flewitt wrote to Mr Niarchos, stating that “the agreement relating to the P11 GT3 expired on 31 December 2016 and there is no agreement in place for the current P13 GT4 project.” The letter went on inform CRS that McLaren would produce the GT4 Cars and would provide technical and aftersales support to GT4 customers going forward. CRS was requested not to build any further cars without informing McLaren and to advise McLaren of the numbers, status and expected delivery dates of any cars in

Mr Niarchos responded on 2 June 2017, explaining that CRS had not attended the meeting on 18 May 2017 due to the fact that McLaren had, without warning, proposed fundamental changes and that CRS wished to consider these with the benefit of a written record from McLaren of what had been discussed. Mr Niarchos further stated that CRS was uncomfortable that McLaren felt it necessary to have legal counsel (Ms Nic Aoidh, who was also a Commercial Director of MAL) at the meeting. Mr Niarchos also defended CRS’s performance in relation to both the GT3 cars and the GT4 cars and gave details of 14 cars in production, stating that it was neither reasonable nor practical that they should be completed by 30 June 2017.

Ms Nic Aoidh replied on 9 June 2017 on behalf of MAL, stating:

“The agreement between McLaren and CRS relating to the P11 GT3 expired on 31 December 2016 and there is no agreement in place for the current P13 GT4 project. The Heads of Agreement dated 3 February 2016 in relation to the P13 GT4 project are not binding and merely set out the working assumptions and an outline of the commercial terms that were to be included in a binding contract, which was never entered into by CRS.”

The letter continued by demanding the completion of production of the seven cars due to be completed by 22 June 2017 and that production of all other vehicles ceased. A further letter, dated 27 June 2017, made the same demand and also indicated that CRS should make alternative arrangements for the hosting of its website and other systems.

It was subsequently accepted by McLaren that its demands of CRS to cease production of the 44 cars and the 87 car part sets amounted to anticipatory repudiations of the Ad Hoc Contracts. These were not, however, accepted by CRS. McLaren duly gave

CRS applied to this court for interim relief on a without notice basis on 30 June 2017. Picken J granted the injunction sought pending a return date. The first return date was 7 July 2017, also before Picken J, who accepted undertakings from McLaren (those undertakings being in a more limited form than the relief granted following the ex parte hearing). The matter came before HHJ Waksman QC (as he then was) on 31 July 2017, the parties agreeing a consent order on 2 August 2017, providing that McLaren would, until judgment or further order, permit CRS to provide aftersales services and support to customers in respect of GT3 and GT4 cars and would not permit anyone other than CRS to use the McLaren GT brand or banner.

CRS’s claim in respect of the GT3 Agreement is based entirely on its proposed interpretation of clause 4.5.3 of that agreement, contending that the true meaning and effect of that provision (that “all after sales services … shall be the responsibility of CRS…”) is that CRS has an exclusive right(as opposed to merely an obligation) to provide aftersales services to GT3 customers and was entitled to do so using the McLaren GT brand and the website portal. McLaren disputes that interpretation, contending that clause 4.5.3 confers no right on CRS at all, let alone an exclusive right.

The relevant principles of contractual interpretation have been considered by the Supreme Court on a number of occasions in recent years, most recently in Wood v Capita Insurance Services Ltd [2017] AC 1177. Lord Hodge JSC summarised the proper “unitary” approach as follows:

“10.

The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of the drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning.

11…. Interpretation is… a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense…

12.

This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated… To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.

13.

Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements…”

The GT3 Agreement is a long, detailed and legally sophisticated contract under seal and is clearly the product of careful drafting by (or at least with substantial input and guidance

Mr Chapman submitted that the clear and natural meaning of clause 4.5.3, in the context of the GT3 Agreement as a whole, is that the CRS has an exclusive right to provide aftersales services to customers, both during and after the expiry of the Contract Period.

In my judgment, however, there is no basis for reading clause 4.5.3 in that way:

Mr Chapman further argued that clause 4.5.3 should be read in the light of clause 7, which provides for CRS to have possession and control of Tooling required to fulfil its obligations under the GT3 Agreement “during the continuance of the Agreement”. He contended that the use of that phrase (rather than the use of the defined term “the Contract Period”) indicated that CRS’s rights to retain the Tooling continued after the expiry of the Contract Period in so far as CRS continued to have obligations under the GT3 Agreement (such as providing aftersales service). This, he submitted, demonstrated that CRS’s responsibility in clause 4.5.3 comprised both an obligation and corresponding exclusive rights to the Tooling and Intellectual Property Rights necessary to perform the obligation.

In my judgment, however, it is plain that the phrase “during the continuance of this Agreement” in clause 7 has the same meaning as “the Contract Period”. The period of “the Agreement” is set out in clause 10.1 (being until 31 December 2016 unless terminated earlier) and the Contract Period is defined as the period so described. It is impossible to construe provisions dealing with the continuance of the Agreement and its termination in clause 7 other than in accordance with the provisions in that regard in clause 10.

As far as the context of clause 4.5.3 is concerned, Mr Chapman first submits that it makes no commercial sense for CRS to be under a continuing obligation to provide the full range of aftersales services to GT3 customers, but to have no right to use McLaren Licensed Rights, no right to retain the Tooling needed to manufacture the parts and no right to require MAL to supply CRS with the necessary parts at all or at a cost allowing for CRS to make a profit.

The answer, in my judgment, is that CRS’s obligation is a provision for McLaren’s benefit, to ensure that its customers receive appropriate aftersales support even after the Contract Period has ended. If McLaren requires CRS to perform that obligation, McLaren would plainly then be under a duty to cooperate by providing the necessary Tooling and Intellectual Property rights so as to facilitate such performance: Chitty on Contracts 33^rd Ed at 24-033. But McLaren is equally entitled to waive the obligation or forbear to insist on its performance: it is plainly McLaren’s intention to effect such a waiver if and when released from the injunction currently in place.

Mr Chapman further submits that clause 4.5.3 should be read in the light of clause 5.1, which provides that CRS’s sole business shall be the GT3 project (including aftersales services), contending that it would be absurd if CRS had no right to carry on its sole business. However, clause 5.1 is not one of the provisions of the GT3 Agreement which survives the termination of the GT3 Agreement (as per clause 11.1.1), with the result that CRS was free from its restrictions on 31 December 2016. Whilst that does not entirely remove the force of Mr Chapman’s contention, as CRS would on the face of matters be left with no business as at the date of termination of the GT3 Agreement, it does demonstrate that the parties provided for a clear change in CRS’s role and its relationship with McLaren as at the end of the Contract Period. From that point it was free to conduct its business as it wished.

I conclude that the language of clause 4.5.3, considered in the context of the GT3 Agreement as a whole, is flatly inconsistent with CRS’s claim that it has an exclusive right to provide aftersales services to GT3 customers after the Contract Period. It would,

It follows that I find that CRS does not have the rights to provide aftersales services in respect of GT3 cars for which it contends. CRS’s claim in that respect therefore fails.

CRS’s claim is that it has a binding contract with McLaren in relation to the GT4 project, pursuant to which CRS has the exclusive right (until at least 3 years after the completion of the last GT4 car) to provide GT4 aftersales services and to be the exclusive supplier of unique and modified GT4 parts.

CRS’s case as to precisely when and how such a contract came into force is, however, far from clear and, to some extent, a moving target. In its written closing argument (§80), CRS’s primary case was stated as follows:

“[T]he HoA, the GT4 Order, GT4 Further Order and the actions that CRS and MAL took in performance of the HoA all evidence that there was a binding agreement in place between the CRS and MAL for the GT4 Project (“the GT4 Agreement”) and the terms of that agreement... It is not strictly necessary…to identify a particular moment when the binding agreement was reached, but it was certainly no later than when substantial performance began to be rendered including by agreement to supply the 47 car sets of parts in October 2016 or alternatively on the conclusion of the Revised Business Case in January 2017.”123.CRS also presented a range of alternative cases as follows (§81):

“Alternatively…, CRS contends that a binding agreement in relation to GT4 Cars is either: (i) contained in the HoA plus the GT4 Order and GT4 Further Order; or (ii) contained in the HoA alone; or (iii) a simple contract for the development, production and assembly of GT4 cars together with the supply by CRS of aftersales support equivalent to the GT4 Aftersales Services, limited to those GT4 Cars that have in fact been produced to date or are currently in production. A further alternative or gloss on these positions is that a binding contract existed on any of the bases contended for by CRS at least unless and until it was replaced by an executed detailed contract as was envisaged by the HoA.”

Notwithstanding CRS’s approach, I consider it is necessary first and foremost to determine whether the HoA was, in itself, a binding contract when signed on 3 February 2016. That issue is an essential starting point, not least because, if the HoA was not a binding contract, the reason for that finding may be an important factor in assessing the subsequent dealings of the parties and whether those dealings resulted in a binding agreement coming into force.

The relevant legal principles

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