Canon Medical Systems Limited v The Imaging Centre Assets Limited & Ors

The court’s task in construing a written contract is one of interpreting the meaning of the contractual language used. As Lord Neuberger PSC explained in Arnold v Britton [2015] UKSC 36, [2015] AC 1619, at [15], under English law the meaning and effect of the language of a written contract is that which that language would have conveyed, when the contract was entered into, to a reasonable person having the background knowledge common to the contracting parties. The question is what the language of the contract means, in its documentary, factual and commercial context.

The Hive Contract and the Heads of Terms, and also how the First Fleet had been established and was operating under the latter, are part of the background facts known to both sides in mid-March 2017 when the Master Agreement was entered into. That does not mean, though, that the provisions of the Heads of Terms assist when construing differently worded provisions of the Master Agreement. As Rix LJ expressed that point in HIH Casualty v New Hampshire Insurance [2001] 2 Lloyd’s Rep 161, at [83]:

“The difficulty of course is that, where the later contract is intended to supersede the prior contract, it may in the generality of cases simply be useless to try to construe the later contract by reference to the earlier one. Ex hypothesi, the later contract replaces the earlier one and it is likely to be impossible to say that the parties have not wished to alter the terms of their earlier bargain. … Where the later contract is identical, its construction can stand on its own feet, and in any event its construction should be undertaken primarily by reference to its own overall terms. Where the later contract differs from the earlier contract, prima facie the difference is a deliberate decision to depart from the earlier wording, which again provides no assistance. Therefore a cautious and sceptical approach to finding any assistance in the earlier contract seems to me to be a sound principle.”

In Matchbet Ltd v Openbet Retail [2013] EWHC 3067 (Ch), Henderson J (as he was then) held at [132] that the effect of an entire agreement clause similar to Clause 43.1 of the Master Agreement was to preclude the possibility of having recourse to the terms of a prior agreement as a guide to the proper construction of the later contract including the clause. TIC submitted that this takes the point too far, and that Henderson J’s decision is inconsistent with HIH Casualty and should not be followed. It will not be necessary to decide whether TIC is right about that.

Though the existence of the prior arrangements and their operation in fact are part of the admissible background common to the parties, the negotiations leading to the Master Agreement, including the process by which the written contract was drafted, are not admissible for the purpose of construing the contract as signed. The rule in that regard is stated sufficiently for my purposes at Section 9 of Chapter 3 of Lewison, “The Interpretation of Contracts” (7^th Ed., 2021) in the following terms:

“Evidence of pre-contractual negotiations is not generally admissible to interpret the concluded written agreement. But evidence of pre-contractual negotiations is admissible to establish that a fact was known to both parties; to decide (in a consumer contract) whether a term has been individually negotiated; to determine which party put forward a particular term; and to elucidate the general object of the contract. Evidence that parties negotiated on the basis of an agreed meaning is only admissible in support of a claim of estoppel or rectification.”

A feature of the Master Agreement that cannot be avoided when one seeks to construe it, is that it is not a well drafted document. That would immediately strike even a casual reader of the document. Therefore, the process of construing the document must be more alive than might be appropriate if the drafting were more tightly constructed and polished to the very real possibility that the language may not have been well chosen, and a meaning conveyed at first sight by some turn of phrase, read in isolation, might have to yield to a different meaning that offers itself only to the reader who takes a bit of time and care to try to read and make sense of the document as a whole. It is fair to observe, I think, that the root cause of what eventually became this litigation is probably fault on both sides, in human terms the equal fault of Mr Kleanthous and Mr Hitchman, in signing an obviously poorly drafted contract rather than putting in the additional time and effort that would have been required to express their bargain more clearly.

A further complication in determining the content of the parties’ contract in respect of the First Fleet is that the Master Agreement does not set out the whole of that contract, notwithstanding the entire agreement clause at Clause 43.1. Rather, supplemental terms of some kind are expressly to be agreed, since Clause 7 provides that CMS will “hire any CT Mobile Scanners and MRI Mobile Scanners that it requires exclusively from TICH pursuant to a hire agreement to be reasonably agreed between the parties subject to availability”. The scope of Clause 7 is in issue between the parties in their competing constructions of the Master Agreement. It will be seen, below, that I find myself in agreement with TIC that it concerns rented Units, not unrented Units, but I do not agree with TIC that the ‘hire agreement to be reasonably agreed’ was to determine the parties’ obligations inter se in respect of the rental income that would be earned by rented Units.

I find it convenient to take first the question of TICM’s status, if any, under or pursuant to the Master Agreement. In short, for the reasons given below, my conclusion is that TICM is privy to the Master Agreement. It is not a third party for the purpose of Clause 43.5 of the Master Agreement so as to be precluded from having rights under, or rights to enforce, the terms of the Master Agreement. Its rights do not derive from the Contracts (Rights of Third Parties) Act 1999, rather they derive from the fact that, properly construed, the Master Agreement is a contract between Assets, contracting for itself and also for and on behalf of (at least) TICL and TICM, and CMS.

In alleging that TICM is privy directly to a contract with CMS, TIC’s pleading refers to a “direct (collateral) contractual relationship on the terms of the Master Agreement”. However, the basis pleaded and pursued at trial for that conclusion is simply that on the proper construction of the terms of the Master Agreement, there is direct privity. I would not label that a collateral contract; but what matters is the substance rather than the label.

The provisions of the Master Agreement that bear on the point are the following:

Reading all of those provisions sensibly together, in my judgment their sense is as follows.

Firstly, as the title page, the definition of ‘Parties’, the reference to ‘direct Parties’ in Clause 31, and the signature page suggest, the Master Agreement is a contract entered into by CMS, on one side, and Assets, on the other side; but in itself, that merely begs the question whether Assets (or for that matter CMS), in so contracting, acted only for itself or also for and on behalf of another company or companies.

Secondly, then, Clause 31 seems to deal with that question, albeit the wording is clumsy because of the bad grammar, and to indicate that TICL and TICM are parties to the Master Agreement, though they are not either of the ‘Parties’ making the contract, because Assets, one of those ‘Parties’, is acting for them in doing so.

Thirdly, therefore, like the Heads of Terms before it (according to the Parties, given how they have described it in the recitals and the entire agreement clause), the Master Agreement is intended to be a contract to which TICM is party although it is concluded (ex hypothesi, for TICM) by another (Assets this time, TICL in the case of the Heads of Terms).

Fourthly, that is why “TICH” has an expanded definition that includes inter alia TICM, even though in some specific places it may have a more limited meaning, for example in the definition of ‘Parties’, or in Clause 31 where it appears in contradistinction to TICL and TICM.

That scheme, distinguishing between CMS and Assets as the (only) Parties by whom the contract is made, on the one hand, and TICL and TICM as parties who are also privy to the contract thus made, Assets contracting for them and on their behalf, may not be carried through the drafting completely coherently or accurately. But the Master Agreement is not a well drafted document; and that scheme makes sense of the key business provisions in Clauses 2, 3 and 28. CMS’s rival construction, by which (for example) only Assets, which has no Units and will be buying no Units, has promised not to buy non-Canon equipment, and TICM, the joint venture vehicle that has Units and will be buying further Units, has made no such promise, makes no real sense.

I acknowledge that, at first sight, the reference to assignment or sub-licensing in the extended definition of “TICH”, read in isolation, might suggest that something more than the conclusion of the Master Agreement itself was envisaged to be necessary to bring TICL or TICM into privity. Reading the Master Agreement as a whole, in my view that possible contra-indication is heavily outweighed by the number and nature of indications on the language used by the parties that TICM was considered and intended to be privy there and then.

That makes it unnecessary to consider the alternatives advanced by TIC that if TICM is not privy to the Master Agreement, it has rights under the 1999 Act or Assets can recover for losses suffered by TICM. For completeness only, and therefore taking this quite briefly:

To explain that last point, the only relevant claim, I think, would be a claim that the alleged failure by CMS, in breach of contract, to sell more Units to add to the First Fleet, led to the loss of staffed rental contracts, since those would have been entered into by TICM, not by CMS, but using First Fleet Units provided to TICM by CMS for those contracts. There would then be, firstly, a question whether the Master Agreement (as a contract between Assets and CMS only), properly construed, required CMS to account to Assets for the full (staffed Unit) rental earned by TICM, and secondly, if that was not the case, a question whether that full rental income could and should be split into (i) an (unstaffed) basic Unit rental, payable by the client to TICM, by TICM to CMS, and therefore by CMS to Assets, and (ii) an additional rental amount, payable only by the client to TICM, for staffing the Unit.

As with the previous categories of claim, if the income amounts not generated would have been payable by CMS to Assets, then Assets would have suffered the loss and could claim damages accordingly. It would only be where the unachieved income would have been income for TICM alone that the claim as presented would be a claim by Assets for damages for loss suffered by TICM. But in a claim for damages between joint venture partners (Assets and CMS) for the failure by one of them (CMS) to take steps the joint venture contract obliged it to take to grow the business of the joint venture vehicle (TICM), the proper claim is surely for the consequent reduction, if any, in the value of the claimant joint venturer’s share of the vehicle. That would require a valuation exercise (counterfactual vs. actual) relating to Assets’ 92% share of TICM, something TIC has not attempted or suggested should be attempted.

I turn now to analyse the content of the parties’ contract under and pursuant to the Master Agreement, with a view to determining the nature and extent of the main obligations upon which the Hire Claim, the Warranty/Servicing Claim and the Unit Sale Claim will turn, that is to say:

No great analysis is required of CMS’s express obligations engaged by the Competition Claim. Thus:

TIC also alleges, if required, that the Master Agreement contains a general implied term of good faith. More fully, the contention is that by an implied term of the Master Agreement, CMS (and TIC) promised to act “in good faith, with fidelity to the bargain, not to undermine the bargain or the substance of the contractual benefit bargained for, and … reasonably and with fair dealing having regard to the purpose of the Master Agreement”. It may seem a disservice to the efforts of counsel in reviewing the authorities in relation to this fashionable contention, and providing in their written submissions their arguments on how the principles might be applied in the present case, but this point need not detain me:

The immediate business context of and created by the Master Agreement is important. The parties were about two years into a five-year joint venture relationship for a business together, with TICM as their joint venture vehicle, in the transportable medical scanner market. A fleet of Units for hire, owned by TICM but kept, maintained, marketed and rented out by CMS for it, had been started and was in operation as part of developing that business.

By the Master Agreement, the parties chose to terminate those joint venture terms early, replacing the remaining three years of doing business together on those terms with a much longer joint venture commitment of at least ten years, at the end of which CMS would be obliged to give back its 8% shareholding in TICM for no consideration unless the Master Agreement was renewed for a further term of at least ten years. CMS was entitled, during the term of the Master Agreement, to realise any marketable value there might be in its 8% shareholding by operating the machinery of Clause 25(b), which provided as follows:

“In the event of TM wishing to dispose of the Shareholding it shall first offer it in writing to TICH stating the required price. TICH shall have 90days either to accept or reject the offer. If it accepts is shall complete the purchase within a further 180 days. If it rejects then TM may only dispose of the Shareholding to a third party with the approval of TICH but at no less a price than offered to TICH.”

For the duration of that long, potentially very long, collaboration, TICM was to be the Official Distributor of transportable units fitted with Canon scanners. From the definition of that term in the Master Agreement, and given that the appointment was effected there and then, TICM was (and to date remains) the entity appointed by CMS “for the purpose of exclusively implementing the Distribution Model Concept in the Territory”.

That is to say, TICM, the joint venture vehicle, was and is the exclusive party appointed to implement the business of “sale, hire and use of purpose built diagnostic centres of, relocatable or mobile nature within Mobile Relocatable Units for providing diagnostic services to the sporting and health care industries” (that being the definition of the Distribution Model). That drafting is awkward, speaking as it does of purpose built diagnostic centres within Mobile Relocatable Units, when a ‘Unit’ will be, at least primarily, a single transportable (mobile or relocatable) unit fitted with a Canon scanner. It is not necessary to resolve definitively the puzzle that creates of what else, if anything, might fall within the definition. On any view, the sense of it is that it extends to “the sale, hire and use” of Units for providing diagnostic services to the sports and health care markets.

That accords with the “joint venture business … for the sale, leasing and marketing of the Units” being defined by the Master Agreement as the Project, to implement and further which inter alia:

As one might expect given the basic joint venture parameters thus described by it, the Master Agreement contained terms that on any view contemplated and related to the sale of Units, necessarily that is Units additional to those already in the First Fleet when the Master Agreement was signed, by CMS to TIC. To be specific, inevitably in practice, and contractually in line with my conclusion that TICM is privy, the sales would be to TICM, the joint venture vehicle by which the Units business was to be conducted.

It is common ground on the pleadings that the Master Agreement provides for any Unit sold to TIC to be taken back immediately by CMS (a sale/leaseback), and that as a result, again by the terms of the Master Agreement (and also, in fact, as events have unfolded) any new Unit sold to TIC pursuant to the Master Agreement was not to be (and was not) delivered to TIC when built, but rather was to be (and was) delivered (constructively) to CMS.

That means that TICM’s appointment by the Master Agreement as inter alia the official distributor for the sale of Units cannot be read as meaning that TICM is to act as intermediate seller for sales of Units to others. The sense, in relation to sales to others, must be that the sale is by CMS to the third party buyer, but through TICM as distributor. On any view, one cannot ignore the agreement expressed through the contractual language that TICM is to be the exclusive vehicle through which CMS is to engage in the rental out of Units. That has the consequence that the terms providing for CMS to market, document, and account for, the rental out of TIC’s Units (i.e., as I have held, TICM’s Units) require CMS to do all of that on behalf of TICM so far as the joint venture arrangement is concerned (even if CMS is identified to the rental client as the lessor), and that is to my mind how those provisions read, on their own terms.

That is the positive reason why, I have concluded, it cannot be right to read Clause 8 as CMS now suggests it should be read, that is to say as providing that CMS leases the whole First Fleet at all times at the 50% rental charge to which Clause 8 refers. The same reasoning can also be expressed in this more negative, but equally powerful, form: if the contract is for CMS to take at the 50% rate all First Fleet Units at all times, then the generation of rental income is a matter for CMS in which TIC has no interest; but that would make it a nonsense that cannot be explained by poor drafting that the Master Agreement devotes so much attention to CMS’s obligations, owed to TIC, in respect of that rental business; in truth, CMS is trying to read the Master Agreement as if it does not provide for a joint venture Unit rental business at all.

What, then, read sensibly, do the key provisions of the Master Agreement, convey? In my view, they convey, firstly, by the provisions defining the joint venture business generally, read with Clause 2, that a business of renting out Units is to be established, pursued and grown by TICM, through the purchase of Units by it from CMS and the provision by CMS of the Services. The activity of renting out TICM’s Units, conducted by CMS as part of the Services, is to be conducted on TICM’s behalf, CMS accounting to TICM for the income generated.

By Clause 3, CMS promises to sell Units to TICM (on a ‘best price’ basis), and to provide the Services in respect of all such Units. It is not the natural reading of Clause 3 to say that in relation to sale it is only an agreement about price if a sale happens to occur. In my view, it naturally reads, in the joint venture context of the Master Agreement, as a promise to sell when TICM wants to buy, with a consequent promise to provide the agreed Services in respect of any Units thus sold. That sense is reinforced by the fact that the commitment to ‘best price’ is separately contained anyway in Clause 19. To be clear, the promise to sell is, obviously, to sell Units pursuant to and on the terms of the Master Agreement, to be added to the First Fleet owned by TICM but in the possession of, and managed for TICM by, CMS under the Master Agreement as part of the Unit rental aspect of the Project, developing and growing the joint venture business.

That being then, in substance, an option in TICM to call for more Units to be sold to it for the First Fleet, it goes without the need to say it expressly that the parties mean TICM will supply from CMS to match TICM’s reasonable demand for more Units. I agree with Mr Penny KC that that sense of Clause 3 is reinforced by the terms in which TICM promises loyalty to Canon in Clause 28, viz. that if it has a reasonable demand for more Units, it may not satisfy that demand except by buying from CMS, unless CMS is unable to satisfy it. That seems to me to take it as read that if CMS is able to meet a reasonable demand by TICM for more Units, it must do so, and the source of that obligation can only be Clause 3 (read in the context of the general provisions about making a success of the Project as a joint venture).

It will be clear, then, that I do not agree with Mr Goldberg KC’s submission that the reference in Clause 3 to CMS having agreed to sell concerns only a price if CMS agrees to sell. I also reject his submission that it assists CMS to compare Clause 3 with Clause 7 of the October 2015 agreement under the Heads of Terms referred to in paragraph 54 above. The Clauses are drafted differently, the 2015 Clause 7 having said that “additional units will be based on business growth and reasonably agreed between both Parties”, so the principle referred to in paragraph 162 above applies. It cannot be said, as Mr Goldberg suggested, that the absence from the Master Agreement of the 2015 Clause 17 words calling for further agreement between the parties before additional units were added means that further agreement between the parties was required under the Master Agreement before CMS might be bound to sell additional Units for the First Fleet.

Mr Goldberg KC also contended that it made no business sense to move from an arrangement where fleet growth, if any, required additional joint consent from time to time, to an arrangement where it was a matter for the reasonable business judgment of the joint venture company buying the Units. I do not agree that there is anything odd or lacking in business sense about the latter, so I do not agree with Mr Goldberg’s conclusion that business common sense required CMS to have a veto on fleet growth. (Nor, to be clear, could I say that business common sense required CMS not to have a veto, and that is not the reason why I read Clause 3 as I do, in the context of the Master Agreement.)

I therefore conclude as a matter of construction, which means reading sensibly the language of the Master Agreement as a whole, in its business context, that by Clause 3 CMS promised to sell Units to TICM if TICM makes a reasonable demand to buy under the Master Agreement to grow the First Fleet. It is not necessary to look for an implied term or consider authorities on implied terms; but for completeness I note that the result is in line with the approach taken by the Supreme Court in Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661.

In the context of the Distribution Model and Project, as defined in the Master Agreement, and TICM’s status as Official Distributor under Clause 2, with its implications, any requirement CMS will have “to hire any CT Mobile Scanners and MRI Mobile Scanners”, as mentioned in Clause 7, will be to satisfy demand to rent Units out; and where it meets that demand, which it must do with First Fleet Units if available, i.e. TICM’s Units, it will be renting them out for TICM. The sense of “to hire” in Clause 7 is ‘to rent out’, not ‘to rent from TICM’. (In Clauses 14 and 23, I acknowledge, ‘leasing’ and ‘rental’ are used, not ‘hire’, in relation to renting Units out; but ‘hire’ is used in the primary definition of the Distribution Model setting the scope of the joint venture business to be conducted through TICM.)

That makes sense of the reference in Clause 7 to the hiring of which it speaks being pursuant to a “hire agreement to be reasonably agreed between the parties”. Without reference to Clause 7, the Master Agreement provides that CMS will have possession, as well as operational and commercial control (for TICM), of all First Fleet Units. But it does not set out the contractual terms upon which First Fleet rentals are to be rented out (by CMS, but for the account of TICM). Those terms are to be reasonably agreed (Clause 7).

Devoid of context, stating that CMS will “hire … from TICH” might convey a rental by TICH to CMS. However, for the reasons I have identified, that is not how in my judgment the language of Clause 7 reads in the context of the Master Agreement. I note also that reading Clause 7 as referring to rental by TICH to CMS would fail to give content to the clear statement that the terms of the hiring to which Clause 7 refers are not to be found within the Master Agreement.

Clauses 8 and 9, then, do indeed go together, and they do deal with CMS renting from TIC, rather than with First Fleet Units being rented out by CMS for TIC. That is, in my view, in contrast to Clause 7, not alongside it (in terms of subject matter, I mean). The language is different, and I think the sense is different. The sense is that CMS undertakes itself to “have on hire”, at any one time, six Units (Clause 9). That is the only term requiring provision of First Fleet Units to (i.e. at least notionally for the use of) CMS, rather than to and for the use of rental customers, so as then to be the subject matter of the 50% rental charge under Clause 8. I do not think it right, in this case, to pay too much attention to the fact that Clause 8 appears before Clause 9 rather than that they appear the other way round in the document.

Clause 9 thus creates the Golden Six, and operates on a Last Six basis: CMS’s commitment is that it will take six Units, no more – it does not say or imply ‘at least six’ – for which it will pay, at the Clause 8 rate; if TIC does not provide as many as six Units under Clause 9, because fewer than six First Fleet Units are unrented, then TIC can only say it has earned from CMS under Clause 8 on fewer than six Units; the effect is, as TIC has contended, an obligation to pay under Clause 8 for unrented Units up to (but not beyond) the six Unit commitment under Clause 9.

That leaves two points of construction of the Master Agreement to consider at this stage:

The terms in which CMS’s ‘best price’ commitment are mentioned in Clause 3 are rather muddled and unclear in meaning. It is there said to be a commitment to sell “at [CMS] cost representing the lowest market price”. The cost to CMS of selling one Unit would be its Equipment acquisition cost (to be paid to CMSE), plus the cost to be paid to the housing manufacturer, plus (perhaps) some measure of the marginal overhead cost for CMS per Unit of arranging the sale of the Unit. As regards the housing cost, CMS has the added commitment at Clause 10 to procure housings initially from Bence “upon the best terms obtainable”. A market price, and (therefore) “lowest market price”, is conceptually different. No doubt any seller hopes that any price achievable in the market (and therefore any lowest market price) will always at least cover its cost, and normal market economics will say that, stated very broadly, one can expect some correlation between changes in a seller’s costs and changes in at all events their offered pricing. That does not change the fact that a lowest market price and a seller’s costs are, ultimately, quite different things.

As I have construed the Master Agreement, however, and thankfully, the primary provision containing CMS’s ‘best price’ promise is not Clause 3, but Clause 19. Reading Clause 3, as regards price, as a clumsy paraphrase of Clause 19 makes better sense of the two provisions, construed together, than imagining that Clause 3 is the substantive provision on price. That in turn, I think, reinforces the view that, read sensibly, Clause 3 in material respect does articulate a promise to sell (on request), not merely a promise as to price if a sale is later agreed.

Clause 19 promises that all Units sold to TIC pursuant to the Master Agreement will be sold at “the best price supplied to any other customer of [CMS] to date or in the future”. The sense of that last phrase, as I read it, is that CMS commits that any sale made immediately following the Master Agreement will be priced to match the best price given up to that point to any other customer, and any sale thereafter (“in the future”) will be priced to match the lowest price given, by then, to any other customer. Subject to that clarification, I consider the language of Clause 19 to be simple and clear. It might be a more involved task, which I suppose could reveal subtleties of meaning that would have to be resolved, to ascertain whether CMS did always give TIC a Clause 19 price. However, there was no claim of failure by CMS to honour Clause 19 (aside from an isolated, and important, point that is raised by the Unit Sale Claim, so I deal with it below).

In the circumstances, I do not think it necessary to go further than saying that CMS’s material obligation was to sell to TIC always at the best price at which up to the time of the sale in question it had sold to any other customer.

It is less straightforward to identify the true meaning of the unrented Unit rate to be paid by CMS under Clause 8. The language used is “at a 50% discount off its usual prevailing rate”. Both sides read “its” as referring to TIC; but of course under the Master Agreement the business of renting out First Fleet Units (on behalf of TICM, as I have held) is given over to CMS. Tempting though it might be to think that, as Mr Goldberg KC suggested, on reflection, by his closing submissions, perhaps Clause 8 has in mind the Price List called for by Clause 14, I do not think that works. Even allowing for the generally poor drafting of the Master Agreement, it seems doubtful that Clause 8 had in mind to refer to that defined term by not using it; and on the evidence, it was always appreciated by the parties that Price List pricing might or might not be achieved, either at all or as any kind of norm. I do not think therefore that Price List prices fit the bill of ‘usual prevailing rates’.

The choice, I think, must be between (a) the rate currently being achieved by CMS for TIC on rented Units, and (b) the possibility that Clause 8 is another example of referring to something known to the parties that may or may not be paraphrased as well as it might have been by the language used. The first of those does justice to the idea of a ‘prevailing’ rate, but it ignores ‘usual’. Even, again, allowing for the fact that the Master Agreement is not a tightly drafted document, the full turn of phrase, TIC’s ‘usual prevailing rate’, surely conveys that the parties had in mind something standardised rather than the variability of the individual rentals placed by CMS from time to time.

Now, by the time the Master Agreement was concluded, the parties had effectively established between them, and were operating by reference to, a rate of that kind, namely the rate guaranteed by CMS under the Heads of Terms. On balance, I think it does better service to the language used to propose that Clause 8 harks back to that established rate. That also fits well the business case for the Golden Six commitment explained by Mr Kleanthous in his evidence, namely that it was a means by which CMS was, in substance, investing in TICM, the joint venture vehicle, rather than providing, as such, consideration for its shareholding, on terms that allowed CMS to know when concluding the Master Agreement the maximum size of that commitment.

I conclude therefore, on balance, that upon its proper construction, Clause 8 of the Master Agreement, the purpose and effect of which, read with Clause 9, was to establish the Golden Six commitment on a Last Six basis, requires payment by CMS at the monthly rate per Unit of £17,333 (MRI) or £14,083.50 (CT). Where more than six Units are unrented, that gives rise to the question identified, and answered, at paragraph 17 above.

TIC’s case was that the Master Agreement does not provide for the proportion of the rental income earned by rented First Fleet Units that CMS is to pay over. TIC submitted that Clause 7 contains an agreement to agree in relation to that, and that there was then, so as to supplement or complete Clause 7, an agreement (singular), evidenced in writing prior to the Master Agreement and by the parties’ conduct for 4 years in operating the Master Agreement, to the effect that all rental income earned by rented First Fleet Units was to be paid by CMS to TICM.

CMS’s case was that there is no relevant supplementary contract, because “its obligations to pay sums to TIC in respect of hire of Units are limited to the provisions of clause 8 of the [Master] Agreement and it is entitled to keep any revenue it receives from sub-hiring the Units.”

I have set out how in my view Clauses 7 to 9 of the Master Agreement are to be read, and how that means they operate. In consequence, I reject CMS’s case on the ground that Clause 8 only concerns unrented First Fleet Units, creating, when read with Clause 9, a Golden Six obligation on a Last Six basis in relation to such Units.

However, that does not mean TIC’s case analyses the Master Agreement and the parties’ subsequent conduct correctly, although a correct analysis does get to the conclusion for which TIC contends, namely that CMS must pay TICM the full amount of the rental income earned by rented First Fleet Units.

TIC relied on the following matters of fact:

The commercial agreement in 2016 that under any new contract, rental income from rented First Fleet Units would all go to TIC (paragraph 216(1) above), was superseded and replaced by the Master Agreement. That is one of the plain effects of the entire agreement clause (Clause 43.1). It is no answer to that for TIC to point to the agreement to agree in Clause 7, if (as it contended) that extended to the question of rental income revenue share. The effect of Clause 7, even on its own terms, let alone when read with Clause 43.1, is that the parties had not yet bound themselves to anything and were to agree terms later for whatever falls within the scope of its language of agreeing to agree.

The difficulty with the subsequent conduct relied on by TIC, in the present context, is that it does not give the appearance of parties seeking and achieving agreement, to supplement the Master Agreement, on a matter not governed by the Master Agreement as signed. The monthly spreadsheets are reporting and accounting documents, by reference to which the parties simply began to operate under the Master Agreement (as it happens, continuing their basic modus operandi from before). The evident purpose of the spreadsheets was to give effect, on a monthly basis, to what the parties had already agreed. Their provision by CMS to TIC was thus apt, other things being equal, to convey to TIC that CMS believed the Master Agreement to require payments to TIC as thus calculated. TIC invoicing on the basis of them was apt, other things being equal, to convey to CMS that TIC shared that belief.

For equivalent reasons, the monthly spreadsheets were also apt to be a means through which a difference of understanding, or dispute, as to what the Master Agreement meant, or how it is supposed to operate, might emerge. The reason for that is by nature the same: the function of the spreadsheets is to give effect to the parties’ contract; therefore, if they calculated amounts due to TIC in a way that either side identified as not how they understood the contract to operate, the spreadsheets might naturally be a focus, directly or indirectly, of a consequent discussion between the parties. The business of TIC invoicing and CMS paying the 8% revenue share initially held back by CMS illustrates the point. Likewise, the discussion about the Golden Six in late 2017, and the first half of 2018, considered in paragraphs 115 to 119, 123, and 130 to 146 above.

The Master Agreement contains terms requiring formality for any variation or waiver (Clauses 29, 43.1 (second sentence), and 43.2). Subject to the impact of those terms, in the light especially of MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, [2019] AC 119, the factual matters to which I have just been referring are or might be the stuff of an estoppel by convention or by representation as to the meaning and effect of the Master Agreement. They do not reasonably convey that the parties were agreeing additional terms left by the Master Agreement to be agreed. Although it is not evidence in any event of a supplemental agreement, because it was internal to CMS, Mr Hitchman’s comment to Ms Drummond about the 8%, at the start of 2018 (see paragraph 121 above), illustrates the distinction. The gist of his comment was that the 8% should not have been retained, and should be paid to TIC as invoiced, because (so Mr Hitchman believed) that was what the new contract required (i.e. the Master Agreement, as signed in March 2017).

I therefore reject TIC’s case that a hire agreement, called for by and so as to supplement Clause 7, was entered into by conduct and provided for CMS to pay TIC all rental income earned by rented First Fleet Units. In doing so, I am in fact doing no more than agreeing with the approach instinctively adopted by the parties themselves (until lawyers became involved), that as between TIC (in fact, TICM) and CMS, entitlement to rental income from rented Units was a function of the Master Agreement, not a matter requiring further negotiation and agreement after the Master Agreement was signed. I noted in paragraph 199 above what I consider Clause 7 left to be agreed; it was not what should happen with rental income earned by rented First Fleet Units.

Although that means I do not accept the route by which TIC sought to get there, nonetheless I still have reached the destination that CMS must pay rental income earned by rented Units, in full, to TICM. I have got there because, properly construed, as I have held, the Master Agreement provides that CMS is to manage and operate the renting out of the joint venture Units (i.e. the First Fleet), owned by TICM, for the joint venture business, the corporate vehicle for which is TICM, the exclusive distributor of Units. CMS is to document that rental activity as part of its support for the joint venture vehicle TICM (Clause 23), and the resulting income is to be accounted for monthly on an open book basis (Clause 20). The effect of those provisions is that the business of renting out the First Fleet is managed by CMS for the benefit of TICM, not for CMS’s own account. It follows that CMS must account to TICM for all that it earns for TICM, by renting out its Units, unless the Master Agreement provides to any extent to the contrary.

It is therefore not a difficulty for TIC that the Master Agreement does not say, in so many words, that CMS must pay to TIC 100% of rental income earned by rented Units. Rather, CMS has the difficulty, and it is an insurmountable difficulty in this part of the case, that the Master Agreement does not grant it any share of the joint venture rental income (just as, for that matter, it does not give Assets any such revenue share). That income is earned for the joint venture vehicle, TICM; CMS and Assets, as joint venturers, benefit from it only indirectly, as shareholders, through their ownership of TICM. The fact that, to date, CMS’s 8% shareholding has not been issued to it cannot affect the proper construction of the Master Agreement as concluded in March 2017.

CMS also benefits, again indirectly, from First Fleet Units being rented out, because each rented First Fleet Unit is a Unit that CMS does not have to maintain on standby in storage. Any Unit in storage has an operational cost for CMS come what may, and may attract a 50% rental charge for CMS as part of its Golden Six obligation.

In the light of that analysis of the Master Agreement and its primary effects, I now turn to consider the various claims pursued at trial.

Early in 2021, CMS communicated to TIC that it would be increasing its prices for scanning equipment by 10%, in line (it said) with an increase in its supply cost due to price increases in Japan, adverse exchange rate movement and additional Customs costs following the UK’s departure from the EU. In what was not unfairly regarded by CMS as a ‘tit for tat’ response, by an email dated 9 March 2021, addressed “Dear Customer”, Mr Kleanthous sent CMS a .pdf file titled ‘CMSUK Internal Mobiles and Relocatables Pricelist 2021’.

The covering email repeated back to CMS its stated grounds for increasing its equipment pricing, and continued: “Please accept this email as confirmation of our Price increase on 25^th February of 10% applicable on all hires from March 1^st 2021. Attached is the amended Price List. NB: Any individual price changes must be agreed and approved in writing.” The attached .pdf was a (proposed) price list for rented Units, i.e. for rentals out by CMS of First Fleet Units, to take effect from 1 March 2021. In line with Clause 14 of the Master Agreement, such price lists had been agreed between CMS and TIC in 2018, 2019 and 2020. This new version had been prepared by TIC from the 2020 price list, adding the proposed effective date of 1 March 2021 in the heading above the price list itself, which was in tabular form, and adding 10% to the 2020 prices in the price list table.

CMS chose to ignore Mr Kleanthous’ email, and therefore failed to respond in any way, constructively or otherwise, to its proposal that the rented Unit price list be put up by 10% from 1 March 2021.

Clause 14 of the Master Agreement obliges CMS to prepare “the Price List for rental of the Units to hospitals and other medical centres” in consultation with TIC; and ‘Price List’ is defined to mean “the price list for the Units to be prepared in consultation with TICH as amended from time to time for the rental of the Units to hospitals, other medical centres or other end users”. In a joint venture agreement for a term of at least ten years, I do not think Clause 14 could sensibly have been read as providing for, or limiting CMS to, a single process of consultative price list setting, at the start of the venture. The Price List definition puts the point beyond any doubt. CMS’s obligation was and is a continuing one, throughout the term of the Master Agreement, to maintain a rental price list for rented First Fleet Units, updating it from time to time, always in consultation with TIC.

It follows that CMS’s decision to ignore Mr Kleanthous’ 2021 price list proposal was straightforwardly a breach of Clause 14. It was itself a wrongful failure to engage in consultation with TIC. It will have resulted in the use by CMS as from March 2021 of a rental price list for the First Fleet that, in breach of Clause 14, was not prepared in consultation with TIC.

No monetary claim arises, however. TIC did not attempt to prove at trial that CMS would have generated higher First Fleet rental income than it has in fact achieved, if its rental sales team had since 1 March 2021 been working from Mr Kleanthous’ proposed 2021 price list. It was not suggested that the Master Agreement includes or implies any promise by CMS that the Price List prices will always, or generally, be achieved.

The monetary claim that was pursued, seeking to link the Canon Contribution to Mr Kleanthous’ 2021 price list proposal, fails for reasons explained already (paragraphs 67 and 68 above).

I concluded, above, that on the proper construction of the Master Agreement, CMS was and is obliged to account to TICM, in full, for rental income earned by rented First Fleet Units. CMS is not entitled to retain any share of that income. I should make clear that I use that language in the way I apprehend the business people involved would, not meaning to suggest by it that TICM has a proprietary interest in payments received by CMS by way of rental income from renting out First Fleet Units. Whether there might be an argument that TICM has any such interest was no part of the litigation and I imagine it might only have practical significance in an insolvency of CMS.

CMS’s monetary claim in relation to rental income from rented First Fleet Units therefore fails in limine. That is the claim, limited to the May and June 2021 spreadsheets, that it paid over 100% of such income under protest in circumstances entitling it to claim if that was an overpayment. It was not an overpayment, however.

For completeness only, I deal with the basis upon which CMS put the claim, if there had been an overpayment. The pleaded case, not pursued, was a bare assertion that overpayment entitled CMS to be repaid. The allegation pursued in closing argument is that in respect of the May and June 2021 spreadsheet figures, it was agreed that CMS would pay 100% of the rental income from rented Units subject to an entitlement to claw back any overpayment the court might determine that to have involved.

That agreement is said to have been reached by the solicitors’ correspondence summarised in the following paragraphs.

In a letter dated 30 April 2021, CMS’s solicitors stated that, without prejudice to CMS’s asserted right to treat any purported termination of the Master Agreement by TIC as a wrongful repudiation, CMS was “prepared to pay the balance of the March 2021 rental income subject to the same being agreed”, adding that “this payment is being paid in view of the parties’ agreement to seek to resolve this dispute via mediation and does not alter its primary position that its only liability is 50% of the prevailing rate. Accordingly, any additional sums paid in respect of the March 2021 rentals will form part of the overall monies our client seeks to “claw-back” in these proceedings following confirmation by the Court that [CMS’s] only liability was, and continues to be, 50% of the prevailing rate”.

TIC’s solicitors’ reply dated 4 May 2021 noted what had been said about March 2021 rental income and stated, in the context of possibly staying proceedings for mediation, that they were “concerned that no reference has been made to the other monthly rental payments which will fall due during any proposed stay and if required up to trial” and that “unless you confirm that your client will continue to pay … 100% of the monthly rental income throughout the proposed stay and if necessary until the outcome of the proceedings, we will proceed to serve our defence and counterclaim within 14 days of … your amended particulars of claim and to apply for a speedy trial due to the extant undertakings [i.e. that resolved the interim injunction application]”.

An email from TIC’s solicitors’ dated 6 May 2021 asked if CMS’s solicitors were in a position to confirm whether CMS “will agree to pay the 100% rental fee up to and including the end of the suggested stay in this matter or indeed until the end of the proceedings” and, if not, whether they would agree to an extension of time for TIC’s Defence and Counterclaim.

A letter from CMS’s solicitors, also dated 6 May 2021, offered dates in June 2021 for a mediation, saying that March and April 2021 rental income would be paid in full “entirely without prejudice to [CMS’s] primary position and … with a view to the parties resolving their dispute amicably”, that it was not reasonable for TIC to insist that CMS pay 100% until the outcome of the proceedings, and that CMS was “entirely confident in its position” that it had only a 50% liability, that CMS would seek to claw back the extent of (what it said would be) its overpayments, but that “Without prejudice to our client’s right of clawback and in the true spirit of conciliation, … our client is prepared to pay 100% of the rental income during a period of the stay which shall be for a period of two months initially with the parties having the liberty to mutually agree to extend the stay …”.

TIC’s solicitors’ reply dated 7 May 2021 confirmed availability for one of the dates offered for a mediation, and stated under the heading “Stay”: “Thank you for confirming that your client will pay 100% of the rental income during the stay and [we] enclose a draft consent order for your consideration.” I was not shown the draft Consent Order, but I note that a Consent Order was in due course issued by the court dated 10 May 2021, providing for a stay of the Claim until 16 July 2021 “in order that the Parties may embark upon ADR”, with liberty to the parties to agree to extend the stay without reference to the court up to 10 August 2021, but not setting out any other terms of or consequent upon the agreement to a stay.

In that exchange, TIC (by its solicitors) was not asked to agree and did not in fact agree that CMS had or would have a right to ‘claw back’ overpayments. It is not now contended that CMS had any such right as it asserted, absent such agreement. The position, then, is that there was no agreement that CMS was to be entitled to reimbursement of any overpayments. CMS had made it clear that it would assert a right to be reimbursed, and TIC could not suggest in the face of that correspondence that CMS had waived any such right, but that simply left open, and not a matter of any agreement, whether such a right existed in the first place.

CMS’s monetary claim therefore would have failed even if it had established that its true liability in respect of rented First Fleet Units was to pay at the Clause 8 rate rather than to pass on the rental income generated.

Having held that indeed CMS’s true liability in respect of rented First Fleet Units was and is to pay over the rental income generated, paragraphs 70 to 74 above set out all that I am in a position to say at this stage, before I have dealt with the Warranty/Servicing Claim, about TIC’s consequent money claim.

I concluded, above, that on the proper construction of the Master Agreement, in particular, that is, properly construing Clauses 8 and 9 as applying only to unrented Units, CMS is obliged to pay TICM for all unrented First Fleet Units at the rate provided for in Clause 8, but up to a maximum of six at any one time.

I examined the monetary claim advanced on that basis by TIC in paragraph 79 above. The upshot is that for the period up to and including July 2023, it could not fairly succeed in a sum greater than £840,588.86, the sum claimed, and I shall invite counsel to assist me further as to whether (a) the proper claim for that period is smaller (and, if so, whether the correct amount can be calculated from the evidence adduced at trial) and/or (b) any further amount can or should fairly be awarded in respect of August to October 2023.

Clause 4 of the Master Agreement obliges CMS to provide warranties and servicing covering all First Fleet Units, “free … for three years from the date of first commissioning and thereafter at 6.5% of its Equipment list price from time to time.” It is common ground that that is to be read as meaning, for each Unit, 6.5% per annum from three years after first commissioning, not a one-off charge of 6.5%. But 6.5% (per annum) of what? That is the question.

The contractual meaning of “[CMS’s] Equipment list price from time to time” is not affected by how various data series may be labelled in the Salesforce software used by CMS, about which TIC neither knew nor ought to have known anything when entering into the Master Agreement. Having construed that contractual language, to decide what it means, and having then been educated about the software and its use by CMS, it might be that some pricing data available in Salesforce amounts to list price data, or data from which list pricing could be derived, in the sense used by Clause 4. But that would be because it so happened that Salesforce contained, or enabled one to calculate, that for which the Master Agreement had made provision. It would not be because the Master Agreement fell to be construed by reference to Salesforce.

Turning, therefore, to the ordinary meaning of the words used by Clause 4, reading them naturally, TIC submitted that:

The final two elements in that submission are, I think, plainly correct. I do not agree fully with the first two elements, however, although I think they push in the right direction. In ordinary parlance a ‘list price’ for manufactured goods normally conveys either a manufacturer’s recommended selling price or the price at which the goods are offered for sale by a seller. My quibble with the first element in TIC’s submission is that, at all events in a business setting, not consumer sales, it seems to me there could meaningfully be a recommended selling price, or normal offered price, that is never, as TIC puts it, ‘charged to buyers’. The business reality could be that at least some discount is always agreed in practice, without that detracting from the uniform, or at least normal, use of a certain price as the seller’s offer. My quibble with the second element of TIC’s submission is its insistence that to be a CMS ‘list price’, a price must necessarily have been set by CMS, rather than be set for CMS higher up within the Canon group. In relation to both of those quibbles, and generally, I consider it is relevant to the meaning naturally conveyed by the contractual phrase to bear in mind that CMS is not the Equipment manufacturer, it is (in substance) the ‘retail’ trader for sales in its territory of scanners manufactured by its ultimate parent, Canon Inc, in Japan.

Allowing for my refinements of TIC’s formulation, in my judgment “[CMS’s] Equipment list price from time to time” naturally conveys a notion of a current recommended selling price, or normal offered price, for sales by CMS, either set by CMS itself or set for it higher up in the Canon hierarchy, as the case may be depending on how such things are organised within the Canon group. There is nothing in the background to the Master Agreement common to the parties that might suggest they were using the language of Clause 4 in any different sense. Mr Penny KC relied on the following matters:

On the evidence at trial as to the nature of the data in Salesforce, it can be seen that they include, or enable one to identify, recommended selling prices for sales by CMS of Canon Inc scanning equipment. The building of a quote for the supply of a CT or MRI scanner, whether on its own in CMS’s main trading business or to be incorporated into a Unit for the mobile/relocatable market, is done with an eye on those prices, and CMS will measure its sales performance and be measured on it by CMSE, by reference to those prices. That does not mean they, or any, prices are uniformly or generally offered, as the evidence is that a bespoke quote is built up for every sale enquiry.

The result is that, although I have broadly accepted, with some refinements, TIC’s case as to what Clause 4 means, I do not accept its submission that no ‘list price’ exists such as is therefore referenced. TIC’s positive case that CMS is entitled, per Unit, only to 6.5% per annum of the price in fact paid by TICM for the Equipment inside, was in reality, as Mr Penny KC acknowledged in closing argument, an argument for the correction of an evident drafting error or the implication of a term required to give Clause 4 business efficacy, if it be found that it provides for payment at 6.5% of a ‘list price’ that does not exist. That is not my finding, however. There is no lacuna that, if it is to be filled, would require the drafting of Clause 4 to be corrected or a term to be implied.

One data series in Salesforce is labelled ‘List Price’. However, on the evidence the ‘prices’ in that data series bear no relation to the reality of offering equipment for sale by CMS. They do not evidence or reflect any notion of a recommended or target, or even possible, margin for CMS to seek over cost. They are numbers detached from the reality of CMS’s sales business. Mr Hitchman tried to suggest otherwise, in cross-examination describing the ‘List Price’ in Salesforce as a “starting point for discounting”, having claimed in his written evidence in chief that it was a price in fact charged by CMS. Mr Hitchman has never made use of the Salesforce package as part of his job and his understanding of it was evidently very limited. Even without my general reservation about the reliability of his evidence, I would have concluded that in relation to Salesforce, with respect, he did not know what he was talking about, and should not have pretended otherwise.

To illustrate the point, in a Salesforce record that may relate to one of the First Fleet MRI Units (and referring to capitalised terms used by Salesforce):

I therefore reject CMS’s case that Clause 4 charges TIC for warranty and servicing at 6.5% of the numbers labelled as ‘List Prices’ on Salesforce. I was unable to detect in Mr Goldberg KC’s submissions in support of that case any basis for the connection it proposed beyond the labelling coincidence. Those submissions therefore, in substance, fell into the error of seeking to construe Clause 4 by reference to uncommunicated information about a data series label in Salesforce that may have been known about at CMS (although not by Mr Hitchman).

As mentioned in the examples in paragraph 255 above, Salesforce gives, for any item of equipment CMS might be selling, inter alia a ‘Local Landed Price’, which will be CMS’s cost to acquire the item, delivered in the UK to or to the order of its buyer, and CMS’s ‘Budget Margin’ for that item. A selling price equivalent to selling at the Budget Margin over the Local Landed Price is the benchmark by reference to which any price quote will be constructed, and the measure by reference to which Canon’s systems will determine the level of corporate seniority at which a quote may need to be authorised. That is so even if those benchmark prices may not be displayed as such within Salesforce and although it may be that not all users of Salesforce at CMS (depending on their seniority) will see the Local Landed Price listed as such. Mr Little explained that “when we set the budget, the sales people come up with what they call an average selling price, so what they think a package of a certain configuration would sell for in the market. And then that will be agreed and CMSE Holland would work their magic of the transfer pricing and come up with the local landed price. That would be set. So the budget margin is the margin that would be achieved if we had sold … at the agreed average selling price.”

The sales team user putting together a possible quote has a free text field for ‘Sales Price’ in which to enter a contemplated selling price for an item of equipment and Salesforce will generate and display a ‘Local Margin’ that the proposed price would give. It is not then difficult to calculate the Local Landed Price, or the benchmark based on the Budget Margin (if the user can see or is told the Budget Margin), as long as it is known of what the stated Margins are percentages. Mr Little explained that they are margins over the local landed prices, reported as percentages of the selling price; and that can be seen to be correct (allowing for rounding off) by doing calculations using the data in the example Salesforce screenshots that were in evidence.

Thus, for example, Salesforce will say that a price of £100,000 for an item with a local landed price of £90,000 gives a 10% margin. If Salesforce shows that a Sales Price of £100,000 represents a Local Margin of 10%, that therefore identifies the Local Landed Price as £90,000, whether or not the Local Landed Price data series is displayed to the user in question. If the Budget Margin for the item is, say, 8%, or 12%, then the benchmark selling price, i.e. the price that would give that margin (as a percentage of the selling price) over the Local Landed Price, is readily calculated as £97,826 (£90,000 ÷ 0.92), respectively £102,272 (£90,000 ÷ 0.88).

My conclusion, then, on the evidence at trial, is that the current recommended selling price identifiable from Salesforce for Equipment (as defined in the Master Agreement), being the price that will generate the Salesforce Budget Margin over the Salesforce Local Landed Price, has been and is now the “list price from time to time” referred to in Clause 4. I have articulated that with some care, because of the ongoing need to keep separate (i) the meaning of Clause 4 (which is a matter of contractual construction, fixing an answer for the term of the Master Agreement), and (ii) the identification of a price that matches that meaning at any given time (which is a question of fact to be determined from evidence, and facts can change over time).

I am not deflected from that conclusion by the fact, relied on by Mr Penny KC in argument, that when CMS’s Mr Siddiqui sought to use Salesforce during the trial to generate pricing information for one of the First Fleet Units, it was not possible to replicate exactly the original Equipment configuration, because what would have been a software upgrade package charged for as a separate item at the time the Unit was ordered is nowadays standard. Issues of that kind resulting from equipment evolution over time might of course arise. I see no reason why they should make it impossible to generate a recommended selling price in Salesforce for, in substance, the Equipment originally sold; and in any event, practically speaking, having contracted with TIC (it may be uniquely) to peg warranty/servicing charges to current recommended selling prices, it is for CMS to ensure that such a selling price meaningfully continues to exist for the life of that contract.

As regards the true meaning and effect of Clause 4 of the Master Agreement, therefore:

That leaves for determination TIC’s monetary claim in relation to charges raised by CMS to date purportedly pursuant to Clause 4 and either paid by TIC or purportedly set off by CMS against what it would otherwise have passed on to TIC in respect of rental income earned by rented First Fleet Units.

Having held that CMS was and is obliged to pass on such rental income in full, as claimed by TIC, my conclusion in paragraph 73 above applies, namely that CMS has underpaid by £966,495.56 less the difference, if any, between (a) CMS’s proper entitlement to warranty/servicing charges under the Master Agreement and (b) the amount actually paid to CMS by TIC in respect of such charges (i.e. not including amounts purportedly set off by CMS). It is CMS’s burden to prove its proper entitlement, in that context of seeking to justify setting anything off against rental income due to TIC. The amount it has been paid is agreed at £1,506,664 (see paragraph 86(1) above). It is TIC’s burden to establish, for any claim to recoup any part of what it has paid, that it has paid more than it was liable to pay, by mistake (that being the only factor alleged by TIC so as to justify a restitutionary claim).

As regards CMS’s proper entitlement, then:

The upshot, and in my judgment the procedurally fair outcome, is that in respect of the period up to and including July 2023 (for which I have the figures – I have observed already that the parties will need to assist me after this judgment has been handed down over what should be done about August to October 2023):

In analysing the main provisions of the Master Agreement, above, I found that on its proper construction:

Some of Mr Goldberg KC’s submissions make it necessary to consider a little further what, in context, would constitute a reasonable request by TICM to buy Units under the Master Agreement. Pursuant to the Master Agreement, TICM is the joint venture vehicle co-owned by Assets and CMS by which, exclusively, the Unit rental business is to be developed and grown over (at least) a ten-year term. To that end, CMS agreed to quarterly meetings “to plan strategy, tactics, commercials and potential investments for development of the business model and the Project” (Clause 32.10), and “regular meetings to ensure individual elements of the Project are delivered on time and key milestones are achieved” (Clause 32.11).

Those arrangements by nature contemplate that, all going well, any growth of the First Fleet as part of developing and growing the Unit rental business will be jointly planned and agreed. But ultimately, as the joint venture vehicle and First Fleet owner, any business decision to grow the First Fleet will be TICM’s decision. The reasonableness implicitly assumed and required by Clause 3 is the reasonableness, from the perspective of TICM’s business, of ordering at the time in question the number of new Units requested. TICM has no reasonable interest in owning Units for the sake of owning Units. A new Unit is an expensive luxury to buy (around £650,000 (CT) or £1,100,000 (MRI)) if there will not be demand for it within an expanded First Fleet; and of course it would not be reasonable for TICM to seek to buy Units if it could not fund the purchase by means and on terms that offered at least a reasonable prospect of a return on that investment for it.

No doubt the primary contemplation of the parties will have been that through the regular strategy meetings, business plans would be adopted for TICM with which all parties were content (TICM itself, also Assets and CMS as TICM’s co-owners). But if in the event different views were taken, in my view the only workable benchmark is that of reasonableness for TICM. That benchmark gives meaningful protection for CMS; and in relation to how TICM was being run CMS would also have the protections afforded by the law to a minority shareholder (again, the fact that the shareholding has not been issued cannot affect the proper construction of the contract). A decision by TICM, otherwise reasonable for it, that the time was right to grow the First Fleet in some given way, cannot be rendered unreasonable by CMS being unhappy with the bargain it struck in the Master Agreement as to how the First Fleet is to be managed.

That deals with the required reasonableness of a request by TICM to grow the First Fleet. By definition, if it is to trigger CMS’s obligation to sell Units under Clause 3, it must be a request to buy under the Master Agreement. Mr Goldberg KC advanced two submissions about that, one simple and correct, the other more complicated and incorrect.

The first, and simple submission, which I accept, is that ex hypothesi there would have to be a request to purchase at the ‘best price’ to which TICM was entitled under the Master Agreement. A request for CMS to sell at a discount of 30% off ‘best price’ would not create an obligation on CMS to sell. To the contrary, other things being equal, it would by nature amount to an invitation to consider selling otherwise than under the Master Agreement; and CMS would be entitled to reject it out of hand, or counter-propose terms that would create an arrangement other than that of the Master Agreement for the requested new Units. Equally, of course, CMS would be entitled, if willing, to accept the request and agree to the new Units being added to the First Fleet, without any other change to the terms of the Master Agreement applicable to them.

That is all, as I say, ‘other things being equal’, because care would need to be taken on the facts over whether TICM was asking to buy only if a discount against ‘best price’ was available, or was asking to buy at ‘best price’ if no discount was available while at the same time seeing if a discount might be offered.

Mr Penny KC submitted that it was a common business idea that a discount might be available for a bulk order, and he had some success in getting Mr Hitchman to agree that, in general terms, in cross-examination. In closing argument, this was elevated to a submission of construction, to the effect that CMS’s ‘best price’ obligation stated by Clause 19 “readily takes account of a bulk discount”. I do not agree that there is room in the language of Clause 19 for the idea that CMS is obliged to sell cheaper than at the ‘best price’ it states. The language is that of a ‘price match’ promise by reference to what CMS has in fact done with others, nothing more. It does not convey an obligation to better that, for CMS to identify the lowest price at which it might conceivably be willing to sell and offer that even if it has never had to go that low with any other buyer.

In my view there is a clear distinction between the two that Mr Kleanthous may not have kept clear in his mind at the time (or since), although I say that just as an impartial response to the frustration I could see that he feels about how things developed, not because it has any influence on the meaning of the contract. Thus, in one passage of his cross-examination, Mr Kleanthous said of his linking a proposal to buy 36 Units to a substantial discount, “But that’s normal. That’s a standard business transaction, to buy in bulk to expect a discount”, then when challenged that there is no bulk discount entitlement in the Master Agreement, said, “Hold on, we are conflicting items here. In my simple mind, I am just trying to buy units for the best price which they [CMS] are supposed to supply me.” As will be seen below, in my view, those answers neatly encapsulate the problem with TIC’s Unit Sale Claim. I think it is Mr Kleanthous who has his wires crossed here. His first answer was fair, but its objective effect was to acknowledge that he was opening up a new transaction negotiation, not operating an extant entitlement. His second answer claimed that what he was doing was within the ‘best price’ term he had in the Master Agreement, and in my view the confusion there was in his mind, not in the question put. That question was, “There’s no bulk discount in the Master Agreement, is there?”, which of course is really a question for the court, not for the witness; and my answer is, no, indeed there is not.

The second, more complicated, submission from Mr Goldberg KC was that Mr Kleanthous was led by cross-examination to agree (i) that any requests that were made for CMS to sell TICM more Units were “on terms which reflected his understanding of the [Master Agreement]” and (ii) that it followed that if his understanding of how the Master Agreement worked was wrong, as regards rental income for rented Units or as regards the Golden Six, those requests were not requests to sell under the Master Agreement. It was said that this was fatal to the Unit Sale Claim if Mr Kleanthous was wrong on either point.

However, the effect of any requests made is a question for the court, not for Mr Kleanthous. That does not mean witness testimony could not be relevant. If the cross-examination had elicited things said by Mr Kleanthous to CMS, those statements would fall to be considered as part of judging the effect of any requests to grow the First Fleet that were said to found an allegation of breach by CMS. But Mr Kleanthous’ evidence was not that he told CMS that any requests to buy were conditional on the Master Agreement working as he thought it did as regards rental income and the Golden Six. In my judgment, all he was doing was agreeing that when he asked for more Units for the First Fleet, in his mind he was asking for more Units that would be operated on the basis that all rental income went to TICM and there would be a Golden Six rule (Last Six basis), because in his mind that is how the Master Agreement worked.

Furthermore, at the time of the requests said to have been rejected by CMS in breach of contract, Mr Kleanthous’ understanding on First Fleet rental income and the Golden Six was shared by CMS, and the First Fleet was in fact being operated on the basis of that shared understanding. The negotiation that did occur, to which I turn below, was led by Mr Kleanthous’ request for a 30% discount. It proceeded, explicitly so in the detailed proposal put together by CMS, on the agreed basis that under the Master Agreement all rental income went to TICM and there was a Golden Six rule on a Last Six basis, and CMS would seek changes to that in return for discounting the price. Yet further, Mr Kleanthous’ understanding of the Master Agreement on rental income and the Golden Six was in any event correct.

Mr Goldberg KC also criticised the way the Unit Sale Claim was formulated in closing argument. The pleaded allegation of breach is a failure to sell Units, in breach of Clause 3. In closing, Mr Penny KC focused on the sales process that CMS insisted was required for a sale, namely (i) request to buy, (ii) quote from CMS, (iii) purchase order, (iv) acceptance of order. He therefore described the complaint by reference to the root cause, on the facts, of the failure to sell (as alleged), viz. the failure by CMS to quote for supply under the Master Agreement in response to a request for such supply. I do not consider that changes the substance. If CMS’s sales processes required a certain sequence, and TICM made a contractual request for supply, then CMS cannot rely on its failure to follow its own processes to deny that it came under an obligation to supply.

The negotiation for a substantial supply of Units that now gives rise to the main allegation of breach began with a lunch at the 2019 UKIO Conference in Liverpool on 10 and 11 June 2019 (‘UKIO’ is United Kingdom Imaging and Oncology). Mr Kleanthous raised the possibility of TIC purchasing 36 Units. His idea was that CMS might commit to supplying Equipment to enable one Unit per month to be completed by Bence over a three-year period. That evening, Mr Kleanthous discussed the plan with Oliver Brown of Bence, hoping that Bence might agree to work exclusively with TIC-CMS. Mr Brown was interested; he conveyed willingness in principle, and production capacity, to commit to such a plan.

Critically, however, Mr Kleanthous made clear to Mr Hitchman at the lunch that for a bulk order of the kind he had in mind, he would be looking for a substantial price discount. He asked CMS to offer 30%. He meant by that, and Mr Hitchman reasonably understood him to mean by that, that CMS should offer terms to supply at a price 30% below the Master Agreement ‘best price’. Mr Kleanthous accepted that in cross-examination:

I consider that Mr Kleanthous only meant to ask CMS to offer 30% off the price of its scanning equipment supplied within new Units, and I think Mr Hitchman understood the request in that way, but I doubt that was said in terms between them. In Mr Kleanthous’ mind, they (TIC-CMS) would work together with any housing manufacturer (hopefully Bence) to get a matching three-year commitment and the best pricing they could. They had used under the Master Agreement an agreed convention that CMS added 5% to Bence’s invoices when passing that cost to TICM in Unit invoices, as a measure of CMS’s own marginal cost of supplying the housing (as to which, see paragraph 204 above), and Mr Kleanthous was not looking for that to be done differently.

On 19 June 2019 at a meeting with Mr Vincent (and Paul Parsons) of CMS, Mr Kleanthous referred to doing a deal with CMS and Bence for one new Unit a month for up to 30 Units. A few days later, on 25 June 2019, Mr Kleanthous emailed Mr Brown saying he was ready to place an order for six Units spread over a year, subject to pricing and an exclusivity agreement.

Any significant price discount, below Master Agreement pricing, was not something CMS could offer TIC without approval from CMSE. On 10 September 2019, Mr Vincent reported to Mr Kleanthous that the fact that CT#1 and CT#2 in the First Fleet had not yet been paid for by TICM was causing issues with CMS’s price discussions with CMSE. Mr Kleanthous saw to it that those outstanding invoices were paid, and on 24 September 2019, in an email dealing with various different topics, he asked Mr Hitchman for indicative pricing for the 36 Unit idea: “Outstanding order for 36 units - Is it possible to have an update and some indicative pricing for these units, we are eager to press ahead so need to know if you are still seriously interested in progressing this?”. (There is a longer story that could be set out in relation to the delayed payment for CT#1 and CT#2, but the detail, and any right or wrong on either side, does not now matter.)

On 8 November 2019 Mr Kleanthous, Dr Kleanthous, Mr Hitchman and Mr Watson met. They discussed the possible purchase, at a discounted price, of 36 Units spread over three years. CMS made clear that it would seek changes against the Master Agreement terms in return. Possibilities mooted included TIC bearing a significant proportion of running costs (70% was suggested by CMS), removing the Golden Six commitment, and reducing the free period for warranty/servicing from three years to two years.

On 9 December 2019 CMS provided TIC with a detailed written proposal for the sale of 36 Canon scanners (not Units) over a three-year period. The effect of the proposal, if accepted, was that indeed CMS would supply only scanners that could be installed into Units, leaving it to TIC to contract, with Bence or whomever, to have them turned into Units. (It was said, in terms, that “3^rd Party items (i.e. non-CMS made) will be excluded from Purchase Order and should be provided directly by TICH or by separate negotiation”, which I envisage was intended to cover inter alia housing for Units.)

CMS’s proposal offered a price discount, but not the simple 30% from the start that Mr Kleanthous had requested. CMS’s offer was for a retrospective rebate of 15% of accumulated invoice value to be earned by CMS, but only upon full performance, i.e. by completion and payment of the final individual order (the 36^th new Unit) with no overdue CMS receivable from TIC, to be paid 30 days thereafter. In return, CMS sought by the proposal inter alia:

The proposal also stated that CMS wanted the parties to consider, as CMS put it, “tapering [operational management] responsibility of existing fleet to TICH until 2021”, and added “TICH will assume all responsibility for Mobiles and Relocatables storage and power for any un-utilised systems in conjunction with their logistics supplier(s) immediately”, which appears to mean CMS shedding that Master Agreement cost on unrented First Fleet Units straight away, not just in parallel with any ‘tapering’ of responsibility for managing the First Fleet.

Mr Kleanthous replied by email on 10 December 2019, stating that “Overall, your proposal represents a significant departure from the current modus operandi”. He said there would be too much to discuss for it to be worth keeping their scheduled two-hour meeting the following day. Putting the matter more bluntly than Mr Kleanthous did, CMS was using his request for a large price discount for a bulk order as a possible hook upon which to have a full-scale renegotiation of the bargain struck by the Master Agreement, with the costs of which it had become disenchanted.

Opportunistic though that was, the opportunity had been given to CMS by Mr Kleanthous. He had not requested to expand the First Fleet on the terms of the Master Agreement. He had asked to improve very substantially for TIC one main element of the bargain, the price of Equipment for Units. I have a sense that what CMS counter-proposed by way of improvements for it over the Master Agreement terms was, qualitatively, more substantial than the pricing improvement for TIC that it offered. Whether that would also be true in quantitative terms was not addressed at trial. Depending on the mix of Units created, if CMS’s terms had been accepted and performed, the price saving for TIC may have been £4-5 million, and it might be that (a) 15%, and (b) only after the 36^th purchase, would not have been CMS’s final word. I am not in a position to assess the (negative) value to TIC of the burdens CMS was seeking to shift onto it, as against the Master Agreement arrangements.

The point for the Unit Sale Claim, however, is that CMS was doing nothing wrong by proposing a set of non-Master-Agreement terms against an invitation to offer for a non-Master-Agreement bulk purchase. Mr Kleanthous is a very experienced, successful, canny entrepreneur. Having had his request for a 30% discount rebuffed, if as decision-maker for TICM he was willing and able to press ahead with a three-year expansion programme for the First Fleet pursuant to the Master Agreement, all he had to do was make that his response. That is to say, he needed only to thank CMS for the proposal, reject it, and make instead an unambiguous request for the supply of Units at Master Agreement pricing and on Master Agreement terms.

Mr Kleanthous did not do that. Furthermore, in the light of his oral evidence at trial on this topic, I am clear that he had no interest in a bulk order of anything like the 36 Units for which he had asked CMS to offer terms, unless he could have both a discount of at least 20% off Master Agreement pricing for the Equipment and substantially the operational and management arrangements of the Master Agreement. If CMS was there for a deal of that kind (which it was not), I consider that Mr Kleanthous might have looked at amending some of the CMS cost elements, e.g. reducing the free warranty period by a year. The allegation advanced by the Unit Sale Claim, that TICM sought, and was ready, willing and able to undertake, a large-scale expansion of the First Fleet on the terms of the Master Agreement, was and is, in my judgment, just wishful thinking.

That is my assessment of the modified allegation ultimately advanced by Mr Penny KC in closing, namely that there ought to have been a new First Fleet Unit per month from mid-2020. The pleaded case, that there ought to have been (and it was through breach by CMS that there has not been and will not be) First Fleet growth, under the Master Agreement, as tabulated in paragraph 91 above, was, in my judgment, quite fanciful.

The first, and major, allegation of breach in the Unit Sale Claim, namely that CMS acted in breach of contract by failing to supply 36 Units pursuant to the Master Agreement, with monthly deliveries from mid-2020 to mid-2023, in response to Mr Kleanthous’ request that CMS offer terms to supply 36 Units over three years at a discounted price, fails.

For completeness, had it mattered I would have held that:

On 21 March 2020, as the Covid-19 pandemic took hold and there was an obvious, immediate and urgent demand in the system for more CT scanning capacity, Dr Kleanthous emailed Mr Siddiqui and Ms Drummond saying that TIC should be rushing through an order for two or three basic specification CT Units “to add to the fleet”. He asked if CMS would be content for TIC to move quickly on that, i.e. to place such an order, and asked if there was any prospect of improving on the normal 22 week build time.

In context, that was a simple, unequivocal request to be allowed to place an order for two or three new First Fleet Units, pursuant to the Master Agreement. There were no strings attached, there was no attempt to get a discounted price. Dr Kleanthous, as medic and businessman, was doing no more than asking for a small step to be taken, within the purview of the existing bargain, such that TICM could increase its ability to help in a national emergency.

Mr Siddiqui replied on 23 March 2020, stating (understandably) that in terms of supply, CMS needed to prioritise its ability to meet demand from the NHS to buy Equipment. He indicated that might mean CMS was not in a position for the then foreseeable future to get Units made for TIC. He said however that if TIC was able to fix a housing contract with a specialist builder, CMS could take an order for the scanning equipment to match, but very unlikely on its normal delivery timeframe. Dr Kleanthous replied the following day, saying he understood, and asking what the revised timescale would be.

By 29 March 2020, however, any availability concerns at CMS over meeting Dr Kleanthous’ modest request had lifted, but regrettably CMS did not simply reply to him with that as good news and commit to supplying under the Master Agreement, as it was (I am clear) then in a position to do. By an internal email of that date, Mr Hitchman set out a range of options, only one of which was to “Carry on with TIC as before [i.e. operate under the Master Agreement] for a few more months because we have enough on our plate and therefore build 2 or 3 more CT’s”. In the absence of any supply issue, and Dr Kleanthous’ request being patently both urgent and reasonable, that was CMS’s contractual obligation, not just a possible business option; CMS was bound by contract to work with TIC as before for seven more years, not just a few more months.

Mr Hitchman’s first three options to consider (complying with the Master Agreement, treated by him as optional, being the fourth), were:

“1.

Keep saying we can’t get the scanners. [That is to say, lie to TIC.]

2.

As NHSI have cooled down on new relocatable CT’s then work with TIC on more but under new contract and 80:20 G6 [i.e. Golden Six] rule.

3.

Stall TIC and build some ourselves anyway in case NHSI come back with urgency.”

By email on 3 April 2020, Mr Siddiqui applied a blend of Mr Hitchman’s options 1 and 2, telling Dr Kleanthous that CMS was willing to quote for two new relocatable CT Units but only if they were supplied “outside of the current agreement and under the full management of TIC”. He offered the usual CMS-TIC ‘best price’ and a three-year warranty period. The explanation given for this approach was substantially untrue, as it stated (inconsistently with the offer to supply two CT Units) that all CT equipment CMS could get its hands on was earmarked for other projects, and suggested that the reason CMS would only supply outside the Master Agreement was because “we still do not see the market increasing long term solely in the unstaffed market”, as to which: the Master Agreement was not and had never been understood to be for Units that would operate solely in the unstaffed market; I do not believe, on the evidence, that CMS’s view in fact was that the unstaffed market would not see (at least some) growth in the long term; and anyway a view about that at CMS was not the reason why CMS was refusing to match Dr Kleanthous’ reasonable demand for Master Agreement supply.

On 6 April 2020, in a long email dealing with a range of topics, Mr Hitchman confirmed to Mr Kleanthous that Mr Siddiqui would provide a quote for two CT scanners for installation into Bence relocatables. That email also asked if Mr Kleanthous wanted to discuss the December 2019 proposal. In reply on that, Mr Kleanthous reminded Mr Hitchman that they had agreed to clear up other outstanding bits and pieces first.

In the light of CMS’s seeming insistence that the two new CT Units would have to be outside the Master Agreement, on 7 April 2020 Mr Kleanthous emailed Mr Siddiqui asking for CMS’s confirmation that it would not consider TIC to be in breach of the Master Agreement if that purchase went ahead. In more detail, he said his understanding now was that CMS was offering to supply two new CTs but not through Assets/TICM. He mentioned Mobile – set up, he said, for a breast screening unit that CMS had been unable to supply – and suggested that Mobile could be the non-Master Agreement purchaser. But, he noted, in that case “we will effectively be running a rival company so will probably need some kind of waiver …”. He said that all TIC’s rights under the Master Agreement were reserved, and that “we would not normally run a company that would compete with our [i.e. TIC-CMS’s] fleet business so would want to be assured by [CMS]’s absolute blessing and official approval.”

In the event, Mr Vincent provided the quotation, on 14 April 2020, it was accepted by Mobile, the two new CT Units were supplied to Mobile, and the Second Fleet was thus born out of CMS’s refusal to abide by the Master Agreement. A written waiver such that CMS cannot complain that the Second Fleet puts TIC in breach of the Master Agreement was in due course provided.

On 1 May 2020 Mr Watson provided Mr Kleanthous with indicative pricing for up to 30 Units to be supplied by Canon to the Second Fleet over three years, including a different price discount scheme to that proposed in December 2019. This time the offer was a discount of 7.5% on the first 6 Units, earned and paid after completing the 6^th purchase, 7.5% on the next 6 Units, earned and paid after completing the 12^th purchase, then, successively, discounts of 10%, 12% and 15% on each following batch of 6 Units, earned and paid after completing the batch in question.

Mr Kleanthous did not pick up immediately that the increasing price discount levels proposed by Mr Watson were only for the respective batches of 6 Units. He thought they would operate retrospectively so that if ultimately 30 Units were purchased, all of them would benefit from a 15% discount. He accepted at trial that in fact, read carefully, Mr Watson’s email did not say that. Be that as it may, a price discount arrangement was ultimately agreed and has been applied to the Second Fleet (the parties having resolved a difference about that which led initially to a pleaded claim in the litigation). But I understand that to mean only that it is a pricing basis agreed for whatever further Units CMS in the event sells for the Second Fleet. The possibility of a contract committing both sides (i.e. CMS and, as it might have been, either Assets/TICM or Mobile) to any particular number of new Units over any given timescale never came to fruition.

The final word on expanding the First Fleet, prior to the litigation, was in August 2020. In an email on 18 August 2020 to Mr Kleanthous, Mr Watson wrote that “we will not accept any further units to be added to the “Canon” Fleet.”; and in an email on 21 August 2020, again to Mr Kleanthous, Mr Watson wrote that “we will only be managing the current “Canon fleet” as it is today. We are not able to manage additional units or costs.”

In context, obviously Mr Watson’s references to the “Canon Fleet” are to the First Fleet. His messages, each of them and together, were a simple, wrongful renunciation of CMS’s obligations under the Master Agreement. The second message was also untrue. CMS is able to manage additional First Fleet Units and associated costs. However, it had become unwilling to do so.

TIC’s own case is that that renunciation was never accepted. Therefore, it gives rise to no damages claim. It is, as the old cases have it, a thing writ in water; an unaccepted anticipatory breach that never became, by acceptance, a breach terminating the Master Agreement and entitling TIC to claim damages for loss of bargain. CMS’s renunciation was effectively withdrawn by CMS’s pleaded stance, reaffirmed at trial, that it will abide by the Master Agreement, as its meaning and effect may have been determined by the court. Specifically, I understand CMS’s position now to be that if the result at trial is a decision that Clause 3 included an obligation to sell Units for First Fleet growth, then CMS intends to comply with it if a request for new First Fleet Units is made that CMS is therefore obliged to meet.

Reverting to Dr Kleanthous’ March 2020 request to order two or three new CT Units, it will be clear from what I have said about that, above, that I find CMS to have acted in breach of the Master Agreement by failing to sell TICM new CT Units to add to the First Fleet, i.e. pursuant to and on the terms of the Master Agreement. Mr Kleanthous reserved TIC’s rights under the Master Agreement as part of what then became Mobile’s agreement to buy instead. On balance, I do not think the evidence allows me to find that there could at the time have been three new Units rather than the two that were in the event agreed and supplied, but to Mobile rather than to TICM. The breach, therefore, is a failure to sell TICM two new CT Units under a purchase order for the First Fleet that Dr Kleanthous’ request should have generated.

If a relevant damages claim had been presented and evidenced, TIC might have been entitled to something other than nominal damages for that breach. No such damages claim was presented, however, and I do not consider that it is the court’s function in those circumstances, or fair to CMS, to attempt some damages calculation for itself de novo by this judgment. The evidence and argument on damages in the Unit Sale Claim was all directed to the wholly different damages calculation that would have fallen to be considered if there had been a valid claim for breach in failing to supply a very large number of new Units spread over the term of the Master Agreement from 2020. Given the price discount on the two new CT Units, and their individual profitability as part of the Second Fleet to date, it is not self-evident that substantial loss has been suffered.

For completeness, I should repeat here that the choice by Mr Kleanthous, in that respect effectively acting for both TIC and Mobile, to have CMS sell the two new CT Units to Mobile rather than TICM, was just that, a choice. CMS’s breach did not require the Second Fleet not to be on TICM’s books (see paragraph 93 above). That is why, in the previous paragraph, I indicated that the price agreed with Mobile, and the profitability of the Units in the Second Fleet, owned and operated by Mobile, would have been relevant to any damages claim for the limited breach I have found.

On the Unit Sale Claim overall, therefore, apart from any declaratory relief to be granted, with counsel’s assistance as to wording, there will be judgment for TIC that CMS acted in breach of the Master Agreement, but an award of nominal damages only.

There are three strands to what was referred to at trial as the Competition Claim. There is a degree of overlap in relation to the facts, in the sense that the existence of a strategy at CMS to involve itself in the Unit rental market in a way that would compete with the First Fleet is disputed and falls to be judged on the whole of the evidence. It will be convenient nonetheless to consider each of the strands separately, in turn, if I take them in this order:

As the parties’ cases evolved and the evidence came out at trial, this is now a very narrow claim. CMS’s relevant obligation, created by Clause 7 of the Master Agreement, is not to rent out a Unit other than a First Fleet Unit if a First Fleet Unit is available for the rental. Mr Penny KC submitted that CMS is not entitled to rely on unavailability in the First Fleet Unit caused by a failure of CMS, in breach of the Master Agreement, to sell Units to TICM to enlarge the First Fleet. That may be right, but it takes TIC nowhere. The only breach I found in the Unit Sale Claim was the failure to supply two new CT Units to the First Fleet, in response to Dr Kleanthous’ request in March 2020. There was no claim that CMS has rented a CT Unit into the market where there was none available from the First Fleet, but one of those CT Units would have been if they had been in the First Fleet rather than the Second Fleet.

The only surviving claim, then, was that one of the First Fleet MRI Units was available, and should have been used, for a contract CMS secured with Living Care for a transportable MRI scanning unit for the English Institute of Sport at the Sheffield Olympic Legacy Park, a redevelopment of part of the old Don Valley Stadium site in Sheffield. The rental ran from 1 June 2022 to 31 January 2023, earning rental income of £354,383.85 plus VAT.

CMS’s pleaded case is that the First Fleet had no suitable unit available. The allegation there is that Living Care “required a more modern scanner with a wider range of use” than the Canon Elan model scanner installed in the First Fleet Unit which CMS admits was unrented at the time. The Unit supplied to Living Care is equipped with a current generation Canon Orian model scanner.

The fact that the Orian scanner is a newer model, with wider capabilities, makes it possible, in theory, that the Living Care contract might have been one that could not have been served by the First Fleet Unit. But CMS provided no documentary evidence suggesting that Living Care required, for the rental period, the enhanced scanning capabilities of the Orian; and there is no basis for a presumption that the higher quality equipment was needed.

No witness evidence was led by CMS either, of a requirement for the Living Care rental that the Elan scanner could not have satisfied. The particularisation of TIC’s Competition Claim came very late in the case, after trial witness statements had been exchanged, so it would not be right to read anything into the absence of written witness evidence in chief on the point. It is nonetheless surprising that a suggestion that Living Care had communicated a specific need that the Elan could not have met emerged for the first time only in the cross-examination of Mr Watson on Day 9. In that evidence, Mr Watson said:

Mr Goldberg KC supplemented that evidence in closing argument, without objection from Mr Penny KC, by producing an extract from Living Care’s website captured on 2 November 2023. It evidences that today, Living Care’s offering includes MRI prostate screening, in what is now a permanent, clinic installation.

I infer that the Living Care rental contract, for which CMS did not attempt to offer the available First Fleet MRI Unit, was a temporary solution for Living Care to enable it to begin providing MRI diagnostic scanning at the Sheffield site pending the completion of the fixed facility. I do not regard Mr Watson’s evidence as any reliable basis for a finding that for that interim period, Living Care required the additional capabilities of the Orian scanner. The website extract corroborates the idea that Living Care’s plans for Sheffield included prostate scanning, and the possibility therefore that they might have been in the process of contracting with an NHS hospital trust or other NHS organ to provide such services. It does not follow that the scanning to be carried out, or in fact carried out, as an interim solution, using the relocatable rented by CMS to Living Care, could not have been undertaken by the Elan scanner.

In my assessment, Mr Watson in truth has no idea whether the scanning undertaken by Living Care during the rental contract period could have been performed by the Elan scanner, or whether Living Care would have taken the First Fleet MRI Unit if CMS had treated its earnings as the priority over making money from the non-TIC Unit. It is surprising that there is nothing in writing to support CMS’s position that the non-TIC Unit was required for the Living Care rental. All the more so since the Living Care contract was placed while these proceedings were on foot. There is no evidence on the point from those in a position to assist the court, either Mr Siddiqui or Living Care itself.

My conclusion is that CMS has not shown that it was within the “subject to availability” exception to its prima facie obligation under Clause 7 to satisfy rental demand for Units exclusively from First Fleet Units. My positive finding, if such a finding is required, would be that CMS chose for its own commercial reasons, to the detriment of TIC’s, to offer Living Care the Orian unit, which was sitting as an unused asset on CMS’s books (for reasons that do not matter for present purposes), rather than to maximise the utilisation of and income for TICM from the First Fleet. The admitted use of the Orian unit rather than the First Fleet MRI Unit that was unrented at the time, for the Living Care contract, was therefore a breach of contract by CMS.

The rental income earned by CMS should have been earned for TICM under the Master Agreement. But for one complication, there would be judgment for TICM in that amount in respect of this breach. The rental income earned is equivalent to £10,125.25 per week, or just under £44,300 per month. That is in line with earnings that have been achieved from First Fleet MRI Units when rented. On the expert evidence, it is also well in line with market rates – if anything, it is quite a low rate – and in my view there is no reason to suppose that any premium was paid within the rate for having an Orian scanner rather than an Elan, in the absence of proof that Living Care required the Orian’s extra capability for the rental period (in which case there would have been no breach).

The complication is that the available First Fleet MRI Unit was in fact treated by CMS as earning a Golden Six payment, during at least some of the months of the Living Care contract, even on the erroneous approach CMS was adopting for the Golden Six obligation at the time. The amount credited to TICM on that basis will have been paid to it, either at the time or now through the judgment that is to be entered in its favour on the rental income claim. It therefore needs to be credited against the rental income earned from Living Care in a final damages calculation for the purpose of identifying the correct judgment sum.

That damages judgment will then replicate, in money terms, the position TICM would have been in if the First Fleet MRI Unit in question had been rented for June 2022 to January 2023 (inclusive). It must therefore be left out of any recalculation of any judgment to be entered in TICM’s favour on the Golden Six claim (as to which, see paragraphs 79 and 246 above).

CMS admits and avers that CMSE owns and operates a fleet of Units that CMSE has rented and is likely to continue trying to rent inter alia into the UK. Self-evidently, as CMS likewise admits and avers, that business is competitive with the First Fleet. That is so whether or not there have been CMSE rentals that could have been First Fleet rentals, in the sense that a suitable First Fleet Unit was available for the rental contract in question. As it happens, CMS admits that such rentals have in fact occurred.

The reason I say those matters are averred, as well as admitted, by CMS, is that its position at trial was that CMSE’s rental activity in the UK is not welcome, an annoyance and frustration, activity CMS would like to see stop.

As regards CMS’s knowledge of or involvement in that CMSE activity, CMS contended that TIC was advancing “a rather far-fetched allegation of a secret agreement between [CMS], its parent company, and two builders of Units to compete against TIC in the UK market”, and argued that TIC was interpreting incorrectly “a handful of emails concerning [CMSE’s] operations”. That submission was in line with the evidence in CMS’s trial witness statements:

That evidence dealt both with the specific complaint that CMS has assisted CMSE with UK rentals of CMSE Units, and the wider allegation TIC makes that there is now a strategy at CMS to increase its involvement in the Unit rental market by working with CMSE, rather than by developing the First Fleet (which competes with CMSE). Irrespective of any such wider strategic context, the evidence was materially untrue as regards CMS’s involvement in CMSE rentals into the UK.

A table obtained by CMS from CMSE for the purpose of providing Further Information it had been required to provide lists some 26 rentals of CMSE Units in the UK since the Spring of 2020, and only one prior to that, which was a rental to a hospital in Rochdale in November 2018 arranged by CMS that led, when it was discovered by TIC, to the Unit in question being sold to TICM to join the First Fleet. The CMSE rental customers have included customers or former customers of the First Fleet. I do not accept CMS’s allegation that TIC was aware at all material times of this activity by CMSE, or of CMS’s involvement in it. There was the episode in November 2018 to which I have just referred; but I accept TIC’s evidence that otherwise, its knowledge of these matters has come from what has emerged through the litigation.

Two of the rentals listed in that table were long-term rentals arranged by Mr Siddiqui at CMS, generating revenue of £832,395, of which CMS retained £126,780. In an email to Mr Watson on 20 October 2020 in relation to the first of them, Mr Siddiqui explained he had arranged it “given the strategic direction of CMS fleet management in Europe”. In relation to the second of them, in a WhatsApp message to a group that included Mr Watson, Mr Siddiqui celebrated that “all of this money will go to CMS with £73,164 for CMS UK”, to which Mr Watson responded “another good win, well done”.

For the most part, the CMSE rentals disclosed by the table seem not to have generated any income for CMS. In those cases, it may be that the rental customer will have dealt primarily with CMSE rather than (if at all) with CMS in arranging for the rental. I say only that that may be the case, because I accept Dr Kleanthous’ evidence that he was told by Rose Tijhaar of CMSE, at a trade convention in Vienna in March 2023, that UK enquiries to rent CMSE Units should be directed to CMS, because I do not believe that CMS has given the court through its trial evidence a complete or accurate account of its activity in relation to CMSE’s Units, and because it is CMS, not CMSE, that has existing relationships with UK customers, as well as being registered on NHS frameworks, so it is inherently unikely that CMSE would or could look to expand its rentals into the UK market so substantially without help from CMS. (On that last point, I note that CMS’s established presence in the UK is the very reason Ms Tijhaar gave Dr Kleanthous why CMS should be contacted for UK rentals of CMSE Units.)

On any view, as the evidence came out at trial, it is clear that all CMSE rentals to UK customers have been facilitated by CMS, commissioning the Unit at the start of the rental, servicing if required during the rental, and decommissioning at the end of the rental. In that regard, CMS’s involvement came out, first, in Mr Bartlett’s evidence. That evidence was then confirmed by Mr Hitchman and Mr Watson when they were asked about it. The upshot is that since CMSE does not have its own servicing team, CMS involvement has been essential to date for CMSE rentals to the UK to take place. On the basis of CMS’s consistent conduct in facilitating CMSE rentals in that way, I would have concluded that a standing arrangement – an agreement by conduct – was in place between CMS and CMSE for CMS to assist in that way. In any event, Mr Hitchman admitted that since January 2023 there has been an agreement between CMS and CMSE under which CMSE is to notify CMS in advance of any CMSE rentals to the UK so that CMS can organise its servicing assistance in an orderly fashion.

The reality, therefore, is that CMS has been working with CMSE for some years, and continues to do so, without which assistance CMSE would have been unable to effect the Unit rentals into the UK it has undertaken, although the rental of Units into the UK by CMSE is self-evidently competitive to the First Fleet and the Master Agreement Project.

Mr Goldberg KC submitted that no breach of contract resulted, because of Clause 18 of the Master Agreement. The argument was that undertaking warranty repairs and servicing for Canon scanners in the UK is a normal part of CMS’s business, and therefore it is entitled to commission, service and decommission CMSE Units, because Clause 18 preserves its entitlement to carry on “its normal trading business”. I do not accept that argument. Even if servicing Units that are in the UK on rental is covered by Clause 18, the point is that rentals that compete with the First Fleet should not be occurring for that service to be required, if they are rentals the existence of which has been facilitated by CMS.

In any event, I do not regard it as clear that servicing UK Unit rentals other than of First Fleet Units is covered by Clause 18. I think the better view may be that CMS’s “normal trading business” refers to CMS’s business selling scanners rather than Units, for fixed (permanent) facilities. It ensures that CMS’s promises not to compete (e.g. in Clause 17) do not put it in difficulty where, say, a hospital is or might be looking at a choice between buying scanning equipment and renting a Unit. CMS is to be entitled, if it wishes, to try to turn that opportunity into an equipment sale, and need not favour the opportunity of a rental contract for the First Fleet. I do not need to reach any final view as to that, however.

In my judgment, therefore, there has been, and continues to be, a breach of Clauses 17 and 41 of the Master Agreement in CMS’s facilitation of CMSE rentals in the UK. It is obviously a matter for CMSE whether it wishes (and is allowed, under Canon group internal policies, if there are any) to compete with the First Fleet, i.e. with TICM’s Units as managed by CMS, if it would have to do so without CMS’s assistance, and whether, if it does not, it wishes instead to help CMS help the First Fleet and the Project by referring demand to CMS, to be satisfied if possible by First Fleet Units and (it may be) justifying requests by TIC to add capacity to the First Fleet by calling for CMS to sell TICM more Units pursuant to Clause 3. However, what should not happen, in the absence of a written waiver from TIC of its non-competition rights under the Master Agreement, is that CMS facilitate CMSE in renting Units into the UK, increasing the competition the First Fleet faces for winning business.

I shall deal with what relief should be granted separately, after considering the question of breach by reference to the third way in which TIC puts its case.

TIC alleges that it has become CMS’s strategy to work with CMSE to develop and generate income for a fleet of Units owned by Canon (CMS itself and/or CMSE), and therefore not to allow the First Fleet to grow, but indeed to act, directly or indirectly, in competition with the First Fleet. I am satisfied that Mr Kleanthous (and also Dr Kleanthous) is in earnest in fearing, and expressing the concern, that that is the reality. Inevitably perhaps with a concern of that kind, formed from the outside, Mr Kleanthous’ view derives from a range of matters, some more, some less significant individually, for which he finds it difficult to see an innocent explanation (from the perspective of the First Fleet and the Master Agreement), leading him to infer that there is a strategic shift away from TIC by CMS. Whether he is right or wrong to be concerned, I am satisfied, as I have said already, that his concern is genuine (honestly held). If he were wrong to be concerned, it might indeed be a case, as Mr Watson argued, of Mr Kleanthous misinterpreting bits and pieces of information (see paragraph 329(2) above). I have concluded, however, that Mr Kleanthous is right to be concerned.

As Mr Penny KC marshalled them in closing, the facts and matters from which he asked the court to find that Mr Kleanthous was indeed not only honestly concerned, but right to be concerned, because CMS has been and is now working with CMSE against the joint venture Project under the Master Agreement, were the following.

Firstly, from December 2018 to September 2019 or so, CMS and TIC had discussions about the possibility of expanding the Project into Europe, with a building programme for new Units that might use Smit, a Dutch coachbuilder, as well as or instead of Bence. Mr Hitchman seemed to be enthusiastic, as was Mr Kleanthous. As part of those discussions, there was a joint TIC-CMS visit to Smit in Rotterdam in August 2019.

Mr Hitchman reported on the meeting internally to CMSE’s CFO by email on 23 August 2019, saying it had been “a very successful visit” such that “we are given homework to submit attractive proposals that incentivize loyalty and accelerated roll out.” TIC, Mr Hitchman said, wanted 36 Orian (MRI) and Prime SP (CT) Units, with a mix around 50:50 and “[a] framework order placed as soon as we can get it all together and roll out over 2 to 3 years”. Mr Kleanthous had indeed asked CMS to quote terms for that sort of supply of Units. I dealt with that in considering the Unit Sale Claim. Mr Hitchman’s email indicates that he had in mind that if a purchase order of that size were agreed, it would be part of expanding TIC-CMS operations into Europe, not just a growth of a UK rental fleet.

Mr Kleanthous gave evidence that this led to the first concern on his part that CMS was choosing instead to work with CMSE. As he explained it:

The principal development a few months after the meeting with Smit, of course, was CMS’s December 2019 proposal. I have already dealt with that. I do not reject Mr Kleanthous’ evidence that he felt “closed down” by it; but I do not consider that to have been a necessary reaction. Mr Kleanthous, in my view, lacked the perspective that he had invited CMS to offer different terms than those of the Master Agreement for the bulk supply he had proposed, by asking them to quote a price to which he was not entitled under the Master Agreement. In any event, an unwillingness on CMS’s part for the financial arrangements of the Master Agreement to apply to a much larger fleet than the First Fleet as it then stood does not evidence an intention to take an expanded fleet business away from TIC. After all, the December 2019 proposal, for all that Mr Kleanthous did not like its terms, was a proposal to supply TIC with the large volume of new Units Mr Kleanthous had said he had in mind. There is no basis for thinking that if Mr Kleanthous had been happy to live with the terms, or a variant of them that CMS might have agreed after a negotiation, CMS would not have honoured its December 2019 proposal.

Secondly, CMS understood from September 2019, if not before, that CMSE was looking to build its own fleet of Units that might be capable of competing with the First Fleet. In a messaging conversation on 11 September 2019, Ms Drummond mentioned to Mr Vincent an email she had received from a French academic leading a lung cancer screening programme who was interested in using a mobile CT scanner. Ms Drummond noted that “if cmse start using their own mobiles i wonder if there would have to be an agreement in place as to who gets first dibs at enquiries like these”. Mr Vincent’s response was “Indeed … could get interesting!”, rather than that no such agreement was needed, or would be appropriate, because CMS’s loyalty had to be to TICM’s Units.

Thirdly, in February 2020, Johan Vochteloo, the individual at CMSE with primary responsibility for the development of its fleet, contacted Mr Hitchman following a meeting in Amsterdam, proposing, in substance, that CMS and CMSE should be working together in relation to the Unit rental market and asking for details of CMS’s activity, i.e. details of the joint venture business, with a view to CMSE benefiting from having that information. Rather than rejecting CMS-CMSE collaboration because of CMS’s exclusivity with TIC, Mr Hitchman replied that CMS “would like to keep working with [CMSE] on rentals to keep momentum going”, and that Mr Watson and Mr Siddiqui would support a mobile Unit that CMSE was showing at an upcoming conference to “grab as many leads for mobiles and relocatables with you. We can then work together growing rental income and positioning assets around Europe.” It will be remembered that the Master Agreement Territory includes anywhere in the world (other than India) in which CMS substantially utilises the Distribution Model.

Mr Siddiqui followed up Mr Hitchman’s email the next day, telling Mr Vochteloo that he would pass on the French lung screening opportunity, that “We are keen to find a way to work together with you regarding the rental systems across Europe and see the benefit to all parties in doing so”, and that at the conference Mr Hitchman had mentioned Mr Siddiqui would “look forward to discussing a new enhanced relationship with you.” Mr Watson joined in a few days later, promising Mr Vochteloo that he and Mr Siddiqui would be at the conference “to fully support and help promote the Secondlife business [i.e. CMSE’s rental Units] as well as our Commercial Solutions business in the UK which as you know is more than just mobiles and relocatables. I’m sure we can benefit from a collaborative approach.” On the same day (10 February 2020), Mr Vochteloo wrote that “it is still on my radar to explore our own European fleet under the Canon umbrella, and if I can do this together with your team than [sic.] that has my preference above the TIC construction. Jamile and Ian are very welcome and to support our mobile possibilities. Looking forward to work together to come to a mutual beneficial program.”

Fourthly, Units from the CMSE fleet have been rented into the UK since July 2020 (the business to which I referred in paragraph 331ff above).

Fifthly, internal emails and a Commercial Solutions 2021 strategy document record a strategy at CMS to distance itself from TIC and work with CMSE on a “Canon Medical Systems” fleet, so that all of the profits would remain in the Canon group:

Mr Hitchman distanced himself from the marketing strategy document, saying it “came from middle management”, was never put before the Board and “did not set out an approved strategy”. It may be that the document was drafted by ‘middle management’, but it was a working document, referred to and updated at regular Commercial Solutions department meetings at least some of which Mr Watson attended. It had his approval by that conduct whether or not he had any input into its drafting. The stated policy is in line with Mr Hitchman’s exchange with Mr Siddiqui and general circular in the summer of 2020. For his part, Mr Watson initially claimed not to have seen the document and noted that “the author of this was the marketing team”; but pressed about its nature and some of its contents, Mr Watson had to accept that he would have seen it at the monthly meetings when he attended. In an unguarded moment, he also recognised that if the document had been drafted by his marketing team (I say ‘his’ since he is CMS’s Director of Commercial Solutions), the understanding of CMS’s rental market policy will have come from what he will have said to the team. He suggested that therefore he must have been misunderstood; but in my judgment there is no reason to think that likely, and the only reason Mr Watson suggested it is that the document is so flatly inconsistent with the case he knows CMS to be running in the litigation.

Sixthly, CMS has expended substantial effort on Orian projects, grappling in particular with design engineering complexities of creating a suitable housing for the Orian MRI scanner. One upshot, as things stand, is that no satisfactory Orian mobile Unit has yet been achieved, but there is a relocatable solution. Four Orian Units have been built, and they all went onto CMS’s books. One was the Unit used for the Living Care contract that I found to have involved CMS in a breach of Clause 7 of the Master Agreement. Two were used to service a CMSE contract to support the Birmingham Commonwealth Games in 2022. One has been sold, but the other three remain on CMS’s books, and I agree with Mr Penny KC that it is a reasonable inference that the reason they are not currently being actively marketed and rented out is probably this litigation, i.e. CMS have in mind to assess what to do with the three Units still on its books by reference to the outcome of this trial.

CMS alleged that the first of these Orian Units – the one used for the Living Care contract – was offered to TIC to buy. That would not be an answer to TIC’s complaint: there is no exception to Clauses 17 and 41 of the Master Agreement allowing CMS to engage in competitive activity using Units if they have been offered to TIC but TIC has declined to buy. In any event, I do not accept the implication that CMS was forced to take the Unit onto its own books by a decision on TIC’s part not to buy. I agree with Mr Penny KC that the evidence shows CMS had the Unit made with a view to renting it out for itself. It identified sale to TIC as another option, but one that CMS would only look at if it felt that better suited its needs than keeping it for itself:

Seventhly, the correspondence does not evidence irritation or annoyance within CMS at CMSE’s rental market activity, extending into the UK market as it has now done on a material scale for over three years. To the contrary, those at CMS consistently appear to share CMSE’s enthusiasm for the fact that, in contrast to the Master Agreement, the relevant rental income will stay within the Canon group. Furthermore, with the exception of the Rochdale rental in October 2018, which CMS informed TIC about inadvertently in response to a request from Mr Bartlett for an updated fleet list, CMS did not inform TIC that it was renting CMSE Units into the UK market, or about CMSE doing so and CMS facilitating that activity.

I agree with Mr Penny KC that those matters demonstrate, in some cases individually and overwhelmingly so when they are taken together, that CMS has been, and subject to the outcome of this litigation would continue to be, an active participant, since the summer of 2020 at the latest, in the Unit rental business of CMSE, including in the UK, which is competitive with the First Fleet and the Master Agreement Project. CMS’s participation has been at the invitation and encouragement of, and by agreement with, CMSE. It has been in breach of Clauses 17 and 41 of the Master Agreement accordingly.

It is fair to say that TIC therefore has proved only a narrower, or smaller, case than the full width or extent of what it pleaded, as a matter of inference, may have occurred. But I am satisfied that the particular complaints pursued at trial were within the scope of the wider pleaded case, and that it is procedurally fair, as well as correct on the evidence, to hold CMS in breach to the extent that has been established by reference to those complaints.

Injunction?

The Master Agreement has not been terminated and is due to run until March 2027. There is therefore room for injunctive relief to be of value to TIC. It asks for an injunction restraining CMS from facilitating the rental of CMSE Units to customers in the UK, and in particular from:

It is for TIC to persuade the court that injunctive relief is available in principle and appropriate on the facts, and to justify the precise terms proposed if an injunction is to be granted. Without losing sight of that, CMS advanced only limited objections. Mr Goldberg KC’s written closing argument made a single submission, namely that to prevent the commissioning or servicing of Units for healthcare settings would not prevent someone else commissioning or servicing them but might put patients’ health at risk due to the delay in, for example, a hospital having an urgent replacement scanner in operation. In closing, Mr Goldberg KC rested, rather differently, on CMS’s pleaded statement that it would comply with the terms of the Master Agreement as clarified by the court, statements by Mr Watson in evidence that there is no present intention of working with CMSE, and an invitation to the court to find that CMS might be glad of the court’s ruling that commissioning and servicing CMSE Units is a breach of the non-competition terms of the Master Agreement, if that be the decision, so it could “show that to Mr Vochteloo and say we can’t do it anymore”, the suggested result being that no injunction was needed.

There are in fact two pleas in CMS’s written submission. Each asserts that an injunction would or might put patients at risk and says that is reason not to grant an injunction.

The first, and narrow, plea argues that to prevent CMS from servicing CMSE Units currently rented in the UK would or might put patients at risk. The practical realities of that were not explored in evidence, but I have found that currently, CMSE’s Unit rentals in the UK have been placed on the basis that CMS will commission, service and decommission the Unit in question. I think it a reasonable concern that suddenly disrupting that, with immediate effect, could have untoward consequences. As a matter of discretion in relation to the precise form of relief to grant, I would err on the side of caution and build in a proviso entitling CMS to service current CMSE rentals in the UK for a grace period of six months, and to decommission CMSE Units currently rented in the UK.

In any event, there would need to be a proviso entitling CMS to commission (etc) CMSE Units, if any, rented by it into the UK in circumstances of First Fleet unavailability.

The second, wider, plea argues that preventing CMS from facilitating further CMSE Unit rentals could put patient health at risk. I do not accept that plea. The expert evidence at trial was of a well-developed UK rental market served by a substantial number of lessors. If CMS’s unavailability to CMSE for the facilitation of UK rentals of CMSE Units will limit CMSE’s ability to win UK rental contracts – and the evidence does not enable me to judge how real, if at all, that possibility is – that is a consequence of the bargain CMS struck by the Master Agreement. (The case has been presented throughout, on both sides, on the basis that the only relevant legal regime is that of ordinary English contract law. There has been no suggestion that on TIC’s construction of the Master Agreement, any part of it is unenforceable under any applicable competition law rules.)

The plea by Mr Goldberg KC in closing that CMS should now be trusted to abide by the Master Agreement, as its meaning and effect has been determined by this trial, is more naturally considered alongside TIC’s reasons for saying that an injunction should be granted.

Firstly, TIC submits, there is no evidence that, if not restrained by the court from doing so, CMS will cease to facilitate CMSE Unit rentals in the UK by commissioning, servicing and decommissioning the Units under the existing arrangements. I agree. Furthermore, the points identified in paragraphs 360 and 361 above are most conveniently addressed as part of an exercise of the court’s discretion over the precise terms in which CMS is to be enjoined from acting, particularly the first point since it does involve striking a discretionary balance so as not to restrain all activity that infringes the Master Agreement.

Secondly, TIC says, the likelihood is that, following the conclusion of these proceedings, unless restrained from doing so, CMS would look to rent out the three Orian Units now on its books, since there is no suggestion that they are about to be sold and there was evidence that, unrented, they are an unwelcome standing overhead cost for CMS. I agree with that too. Mr Watson did not give a straight answer to the simple question whether CMS would look to rent these Units if it could not sell them, saying instead that “it is not an intention, if Mr Kleanthous wishes to buy them, we are happy to sell them”. If TICM reasonably considers that these Orian Units would be good for the First Fleet, then under Clause 3 of the Master Agreement it can require CMS to sell them to it for them then to be managed under the Master Agreement. If TICM does not take that view, but Mobile wishes to add them to the Second Fleet, it may be the parties will agree terms for that. Certainly, I did not form the view that Mr Kleanthous is trying to saddle CMS with overhead costs just for the sake of it. But ultimately whether the Units are sold, and if so whether to one of Mr Kleanthous’ companies or to a different buyer, is not relevant to whether CMS should be allowed, for so long as they are not sold, to use them to compete with the First Fleet. The short answer to that, I consider, is no.

Thirdly, the injunction sought goes beyond servicing (etc) support for CMSE rentals, and rentals by CMS otherwise than of First Fleet Units in breach of Clause 7. The wider aspect is whether CMS should be restrained, in more general terms, from assisting CMSE with its Unit rental business.

I have found that CMS’s strategy from mid-2020, set from the top, was to steer CMS away from TIC, and to work with CMSE instead, and that the target (had it not been for this litigation) was to build up by 2023 a ‘Canon Medical’ fleet, by nature competitive with the First Fleet, with a view to earning and retaining within the Canon group more of the Unit rental income that might be available in the market than could be achieved through the Master Agreement. At the time when that strategy was set and communicated internally, the understanding at CMS was that all rental income from renting First Fleet Units had to be passed to TICM, which I have concluded is a correct understanding. CMS has not been frank with TIC, or with the court, about that strategy. Instead, CMS sought through the unpersuasive evidence of unreliable witnesses to explain away the clear evidence of its strategy in the documentary record, and to cast Mr Kleanthous as conspiracy theorist.

In my view, there is a strong likelihood that, unless restrained by the court in terms that spell out with clarity what CMS is not to do, CMS will continue to work with CMSE, competitively with the First Fleet, for the remaining duration of the Master Agreement. It is just and convenient for there to be an injunction in such terms as will seek to ensure that CMS now sticks to the bargain.

By s37(1) of the Senior Courts Act 1981, the court has jurisdiction to grant a final injunction following trial where it is just and convenient to do so; and it has long been the law that the court will usually grant an injunction to restrain a breach of an express negative covenant, such as a contractual promise not to do something, if it is not shown affirmatively that granting such relief would operate unjustly, for example by imposing extreme harshness on the defendant out of proportion to its wrongdoing. The principle was reviewed helpfully by Teare J in SDI Retail Services Ltd v The Rangers Football Club Lte [2018] EWHC 2772 (Comm) at [46]-[52].

To the extent that an injunction to enforce a contractual prohibition aims to prevent an anticipated future breach of a prohibition (a quia timet injunction), rather than only to respond to and require cessation of a past or continuing breach that has already been established, the court will ask two, cumulative, questions (see, for example, Vastint Leeds BV v Persons unknown [2018] EWHC 2465 (Ch), [2019] 4 WLR 2, per Marcus Smith J at [31(3)] after reviewing some of the authorities):

In this case, subject to the qualifications I identified in paragraphs 357, 360 and 361 above, in my judgment it is appropriate to grant a final injunction.

CMS has acted, and is continuing to act, in breach of express negative covenants contained in the Master Agreement by facilitating the rental of CMSE Units in the UK. It also acted in breach of such a covenant by renting its own Orian Unit to Living Care, during the proceedings, and is likely to repeat that type of breach unless restrained. CMS has agreed to work with CMSE, competitively with the First Fleet, and it set a three-year business strategy for its Commercial Solutions business accordingly, in breach of its express contract not so to compete; and I have concluded that there is a strong likelihood that, unless restrained by the court, CMS would continue to do so.

CMS’s breaches are by nature harmful to TICM’s business in such a way that it is inherently difficult to demonstrate particular quantifiable loss. Seeking to prove that CMS’s competitive activity has resulted in measurable losses in TICM’s business could be almost impossible; but the competitive behaviour strikes at the heart of the relationship created by the Master Agreement. It is simple justice to give TICM the security, for the remainder of the term of the joint venture, to grow the First Fleet, if (other things being equal) it formulates a reasonable plan for such growth taking advantage of CMS’s sale promise under Clause 3, and to work with CMS, and have CMS work for it, to maximise the rental income generated by the First Fleet, free from the spectre of CMS working in the background against its interests.

Though TIC has established only a relatively limited actual breach of CMS’s obligation to add to the First Fleet by selling further Units to TICM pursuant to the Master Agreement, I consider that TIC is correct to understand that CMS’s wrongful declaration in August 2020 of an unequivocal unwillingness to allow the First Fleet to grow was motivated by the strategy set by Mr Hitchman of weaning CMS off the contractual relationship with TIC under the Master Agreement.

To the extent that the injunction proposed would operate quia timet, in my judgment that is justified by the fact that competitive behaviour might or might not be apparent to TIC before it may have caused harm that will be difficult or impossible to demonstrate or measure with any confidence. The possibility of an interim injunction, granted promptly upon TIC becoming aware, if it did, of infringing behaviour, does not, I think, adequately meet the threat to TIC’s legitimate interests under the Master Agreement.

Damages?

TIC pleaded no particularised damages claim in respect of the breaches by CMS of Clauses 17 and 41 of the Master Agreement that have been committed to date, on my conclusions. In that regard, its pleaded case was:

At trial, TIC sought instead a judgment for damages to be assessed, with directions for the exchange of further pleadings and evidence, and a separate damages trial.

In One Step (Support) Ltd v Morris-Garner and another [2018] UKSC 20, [2019] AC 649, the Supreme Court reaffirmed the compensatory nature of damages for breach of contract, in the context of a claim for breach of a non-competition covenant. Neither difficulty in quantifying loss, nor the deliberate nature of the breach (if it was deliberate), nor the claimant’s interest in preventing the defendant from undertaking profit-making activity in breach of the covenant, justified a different approach. The breach did not result in the loss of a valuable asset protected by the contractual right infringed; the loss for which damages could be awarded would be the claimant’s loss of profits and goodwill resulting from competition by the defendant in breach of its covenant.

TIC’s pleaded claim, therefore, was conventional, but limited to proven lost profits (it did not assert a compensable loss of goodwill). It claimed to have suffered a loss of profits that would be particularised after disclosure, and for which it would seek an award of damages at this trial. Mr Penny KC in his written closing submissions also mentioned the reference in One Step at [105], per Lord Sumption JSC, to the possibility of awarding damages for the loss of a chance to win profitable business rather than on the basis of proof (on the balance of probabilities) of profits lost. But no such claim was pleaded here.

The claim to be particularised, therefore, but which never was particularised, was a claim that CMS’s competitive activity, in breach of contract, has had a measurable impact on TICM’s First Fleet revenue (over and above the loss from CMS not having placed the Living Care contract with the First Fleet). In closing, Mr Penny KC submitted that such damages were likely to be assessed most appropriately “by reference to [TICM’s] lost profits, or alternatively by reference to [TICM’s] lost chance of doing more business, especially over the past 18 months or so when utilisation rates in the First Fleet have fallen”. I do not disagree with the thought that a fall in First Fleet utilisation rates might be a phenomenon worthy of investigation as possible evidence of the impact of CMS’s breaches of contract. For such an investigation to have been part of this trial, TIC should have pleaded a case by reference to that phenomenon.

By an application made at the second of two pre-trial review hearings, a month before trial, TIC sought permission inter alia to strike through the plea that the loss claimed in the Competition Claim was particularised in the Schedule of Loss, and to plead instead (so far as material) that: “[CMS’s] breaches of the Master Agreement … particularised at paragraphs 73.2-73.2F (the Competition Claim) … have caused … TICM (alternatively Assets) to suffer loss and damage … . … TICM (alternatively Assets) seeks an assessment of the damages owed to it in consequence of [CMS’s] breaches of the Master Agreement concerning the Competition Claim.  In the premises, TICM (alternatively Assets) claims damages for breach of contract in a sum to be assessed.” I refused that application, considering that it was made too late and that any question of whether a claim for substantial damages should be entertained, or a judgment should be granted for damages to be assessed, ought in fairness to be considered on the basis of the pleading as it stood.

Mr Penny KC invited me, in his closing argument, to consider that the refused amendment did not seek to claim an assessment that was not already claimed, but only sought to remove references to specific particulars of loss and clarify that TIC sought an assessment. But given the basis on which the application to amend was refused, in my judgment, it is now simply irrelevant. It failed, on the basis that and therefore with the result that, to whatever extent the way TIC has pleaded its case might matter when it comes to the relief to be granted following the trial, the pleaded case is what it is, and TIC must live with that result.

The court has power under CPR 3.1(2)(i) to direct a separate trial of any issue, and in principle that power may be exercised at any stage of the proceedings. It was submitted that in exercise of that power I should now order that the quantum of any damages in respect of the Competition Claim, in its wider elements than the Living Care contract, should be assessed at a separate trial. Mr Penny KC contended, as to the justice of that outcome, that:

Those factors, Mr Penny KC submitted, explained why neither party had engaged (either in pleadings, or in evidence) with the issue of the loss that TIC may have suffered as a result of CMS’s competitive conduct. The justice of the case, he argued, was to order a second trial.

Mr Goldberg KC submitted, to the contrary, that TIC’s pleaded claim was for an alleged loss of profit that would be pleaded, for this trial since no split trial had been directed. TIC had simply failed to particularise loss, and had failed at trial (indeed, made no attempt) to prove that any loss had resulted from the matters it relied on as constituting a breach of CMS’s non-competition covenant.

On this aspect, I prefer Mr Goldberg KC’s submission. TIC’s pleading did not convey the notion that it would be seeking a second trial, so that CMS knew where it stood and the court could consider any case management implications at earlier stages. The reference at the end of paragraph 75 of the pleading to claiming damages “in a sum to be assessed”, read in the context of the plea that the loss suffered is particularised in a Schedule of Loss which promised particulars after disclosure, and case management directions ordering a single trial of all issues in the case, reads as a claim for damages to be assessed at that trial.

I agree with Mr Penny KC that the court does have power to order nonetheless a further damages trial. However, it is likely to be unfair to disturb in that way the claimant’s, the court’s, and other court users’ legitimate expectations that this trial would bring this litigation to a close, and to expose the parties to unbudgeted further substantial time and cost commitments to litigate rather than allow them to get on with their business in the aftermath of this trial, unless (i) there is a powerful good reason why TIC made no attempt to plead the promised case on loss and damage, and (ii) there are reasonable grounds to believe that a case with significant prospects of success exists that a refusal to order a damages assessment would defeat.

Here, I do not consider there to be any good reason for the failure to plead any case. As Mr Penny KC submitted, the focus would be on the First Fleet as it has been. The Competition Claim breaches were not causative of the failure of the First Fleet to grow any more than it did. That was caused, to the tune of two CT Units, by CMS’s breach of Clause 3 of the Master Agreement in 2020. It was caused more generally by TICM’s decision not to call upon CMS to sell it more Units at the Master Agreement price so as to be entitled to have them added to the First Fleet and managed by CMS accordingly, or at all events TICM’s failure to call for any such growth. The issue, therefore, would be whether the First Fleet has suffered, i.e. has achieved lower utilisation, lower rental rates, or both, by reason of CMS’s competitive activity, such as has been established, since the summer of 2020.

There is force in the criticism of CMS’s response to the Competition Claim within the litigation. However, the impact was to delay TIC’s access to some of the evidence it was able to deploy at trial to demonstrate – to the extent it has – that CMS has been doing what TIC had claimed. None of that was reason not to consider, plead (if a viable case was available to be pleaded), and investigate as part of this trial, a case that the First Fleet has underperformed in the absence of ordinary market reasons for the underperformance. Nor has any of the evidence that came into the case only in the last few months, or at trial, enabled some such case to be pleaded that could not have been before. No draft particulars of loss have been produced; TIC, it seems, is unable to put forward anything more than a wish to start thinking properly about damages now, for the first time, to see if some claim might be pleaded.

The circumstances, then, are that there is no good reason for the failure to plead, if there is a serious case to plead, and the possibility that there might be a serious case to plead of substantial loss caused by the breaches alleged by TIC (to the extent they have now been established) remains speculative. By a comfortable margin, justice is better served by insisting upon the finality for this litigation that this trial was intended and expected to bring.

There will be an injunction, but an award of nominal damages only, in respect of CMS’s breaches of Clauses 17 and 41 of the Master Agreement. I shall ask counsel when this judgment is handed down to assist with the precise terms for the injunction, if they have not been agreed.

To conclude, I now set out the result of this interesting and multi-faceted trial.

On the proper construction of the Master Agreement:

CMS acted in breach of Clause 14 of the Master Agreement by ignoring TIC’s proposal to revise the Price List (as defined in the Agreement) with effect from 1 March 2021, but that breach caused no loss.

For the period up to and including 31 July 2023, CMS owes TICM £966,495.56 in respect of First Fleet Unit rental income, but I need further assistance from counsel to identify what, if any, sum I can find that CMS owes TICM in respect of unrented First Fleet Units. The question also arises whether debts of either type are owed in respect of August to October 2023 (inclusive), and if so whether they are to be dealt with under this judgment.

CMS has failed to establish that it has been underpaid for warranty/servicing charges under the Master Agreement to date; and TIC has failed to establish that there has been any overpayment to date.

CMS acted in breach of Clause 3 of the Master Agreement by failing to sell TICM two new CT Units to add to the First Fleet in response to Dr Kleanthous’ request for new Units in March 2020; but otherwise, breach of Clause 3 was not established, and damages for the proved breach are nominal only.

CMS acted in breach of Clause 7 of the Master Agreement by failing to use an available First Fleet MRI Unit for its contract with Living Care for the rental of a Unit from June 2022 to January 2023 (inclusive), for which TICM’s damages are £354,383.85 less the aggregate of the Canon Contributions credited against the Unit in question in CMS’s ‘First 6’ monthly spreadsheets for those months.

CMS has acted, and unless restrained is likely to continue to act, in breach of Clauses 17 and 41 of the Master Agreement, in facilitating the rental in the UK of CMSE Units, and in having agreed with CMSE to work with it, competitively with the First Fleet, in the business of renting Units in the UK, with a view to revenues being retained within the Canon group. Damages will be nominal, but it is just and convenient, subject to the precise wording, for CMS to be restrained by final injunction from so acting in breach.

TICM will be appointed by TM as the Official Distributor of the Units upon the terms hereinafter contained

TM has agreed to sell the Units to TICH at TM cost representing the lowest market price and provide the Services as and when reasonably required to TICH and end users of the Units

TM will provide free Warranties and free servicing for the Units and Equipment for three years from the date of first commissioning and thereafter at 6.5% of its Equipment list price from time to time

The cost of performing all the Services will be borne by TM.

TM undertakes to hire any CT Mobile Scanners and MRI Mobile Scanners that it requires exclusively from TICH pursuant to a hire agreement to be reasonably agreed between the parties subject to availability.

TICH will provide the CT Mobile Scanners and MRI Mobile Scanners to TM at a 50% discount off its usual prevailing rate

TM undertake to have on hire a mixture of six MRI Mobile Scanners and CT Mobile Scanners at any one time

TM will procure the housing for the Units initially from W.H.Bence upon the best terms obtainable.

TM will operate The Academy

TM shall be issued with the Shareholding solely in consideration of its obligations and commitments hereunder and for no financial payment

TM will be entitled to appoint one member to the TIC Medical Committee Board

TM will prepare in consultation with TICH the Price List for rental of the Units to hospitals and other medical centres

TICM shall at all times throughout the Term be entitled to use the name “TM” or any new successor brand or trading name of TM solely in connection with the Units and TM hereby licences the right to TICH to use TM’s logos (in each case subject to TM’s prior approval, such approval not to be unreasonably withheld) and the benefit of TM’s marketing resources in conjunction with those of TICH. The branding and external design of the Units shall be mutually agreed.

TM will at all times allocate reasonable marketing resources to establish the Units as a product in the medical field as agreed from time to time.

Other than as provided herein TM will not enter into any agreements competitive with the terms hereof during the Term

TM shall retain all existing rights to continue its normal trading business..

TM will at all times provide or procure all Units, Equipment and Services at the best price supplied to any other customer of TM to date or in the future

TICH and TM shall procure the creation and maintenance of a central reporting hub and will each procure the provision of monthly accounts in relation to income arising from the Project on an open book basis with a mutual right of inspection for both TM and TICH. Such inspections shall not take place more often than twice in any twelve-month period of The Term upon written notice and at times and places reasonably convenient to both parties.

TM will liaise with and assist TICH in procuring suitable students from The Academy to operate the Units and Equipment. The Units themselves may sometimes be operated by radiographers contracted by or to TICH who may source the same from The Academy.

TM will provide a free portable ultra sound to every centre opened by TICH together with a Warranty and a servicing obligation as outlined in clause 4

TM will support TICM with all documentation in relation to the leasing and/or rental of the Units and arrange for the completion of the same.

TICH will have first option in respect of expanding the Project into other markets such as dental and veterinary centres

TM will at all times during the Term provide TICH access to its sales and servicing support as necessary for the performance of this Agreement

TICH agrees that during the Term it will not purchase any scanning equipment not manufactured by TM unless TM is unable to supply any equipment from time to time as reasonably required by TICH notwithstanding that the typical lead times for these Units is four months. In that event, TICH shall advise TM of its emergency purchase of alternative equipment prior to completing any purchase and will in any event not promote the manufacturer of that equipment.

This Agreement shall not be varied and none of the terms hereof shall be deemed to be waived or modified except by an express agreement in writing signed by both of the Parties and TICH.

Failure by either Party to exercise or enforce any right conferred by this Agreement shall not be deemed a waiver of any such right nor operate so as to postpone the exercise or enforcement of any other right to any other occasion.

TICH confirms that notwithstanding that neither TICL nor TICM are direct Parties to this agreement and that it has the power to contract on their behalf as its subsidiaries.

TM’S RESPONSIBILITIES

Invest in upgrades where needed in all of the Equipment where necessary to ensure the latest available technology; and

provide initial and ongoing clinical applications and training to appointed staff to run the Equipment; and

agree to locate and operate The Academy within The Hive for the duration of the Term, and to utilise The Hive to run at least one course per month. (

to maintain a Website link to relevant TICH Websites; and

provide marketing expertise and resource in order to raise the awareness of the collaboration, and to the wider healthcare community to increase patient referral rates, all managing and marketing to be mutually agreed by the Parties; and

provide marketing support for the Project as may be reasonably required with marketing and publicity support, utilising TM’s in house expertise with website design, Google search engine optimisation and marketing material design (all material to be mutually approved before release); and

design and provide promotional branding marketing materials as may be reasonably required and

support research projects that are mutually agreed with clinician input and additional applications support; and

facilitate off-site training where needed for radiological or radiographic staff to optimise capabilities; and

agree to quarterly meetings to plan strategy, tactics, commercials and potential investments for development of the business model and Project, for the duration of the Term; and

support regular meetings to ensure individual elements of the Project are delivered on time and key milestones are achieved

work towards other projects with TICH exclusively using this business model at other sites; and

insure the items on hire pursuant to clause 8 hereof (to include product liability) for the duration of this Agreement in an amount to be agreed between the Parties based upon advice sought and received from specialist brokers (including any extensions hereof) and note the interest of TICH on the policy and provide TICH with a copy of the same; and

make available in house expertise and resource to commence the Project

TICH’S RESPONSIBILITIES

make available facilities (at the then current hiring rate) for TM to run The Academy within the new buildings at The Hive (to include access to meeting rooms and a conferencing suite which may not necessarily be contained in the new building) on an ad-hoc basis with at least two-months’ prior written notice; and

provide suitable space for approved TM branding on the outside of the new extension building at The Hive or nearby in the grounds, such branding to be supplied (and if requested by TICL installed) by TM at its own costs; and

provide buildings and imaging rooms to a finished clinical standard that comprise the Imaging Centres, staff to run the Equipment and associated IT and maintenance programmes; and

make all reasonable endeavours to recruit patients and medical expertise to consult with patients; and

achieve the required regulatory standards and authorisation from the authorities to run a patient centric medical diagnostic centre; and

ensure best practice to maximise the safety of patients; and

provide qualified staff to operate the Eqiupment; and

consider the expansion of this business model exclusively with TM in other sites; and

upon completion of installation, accept the Equipment from TM and sign an acceptance certificate to evidence the same; and

to maintain a Website link to relevant TM Websites

TM’S WARRANTIES

It will not enter into any agreement inconsistent with the terms of this Agreement and will comply with all applicable laws and regulations with respect to the performance of its obligations under this Agreement

TICH’S WARRANTIES

ASSIGNMENT

NON-COMPETITION

MISCELLANEOUS

This Agreement represents the entire agreement between the Parties at the date hereof with respect to the subject matter whether oral or written and for the avoidance of doubt save where specifically stated supersedes the agreement between TM and TICL and the existing agreement and heads of terms between TM and TICM and in particular excludes warranty, conditions or undertaking implied by law or by custom. Any amendment or variation must be in writing signed by both Parties

No waiver of any term, provision or condition of this Agreement shall be effective unless it is in writing and signed by the waiving Party. No failure to exercise nor any delay in exercising any right or remedy hereunder shall operate as a waiver thereof or of any other right or remedy hereunder, not [sic.] shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy

Nothing in this Agreement is intended to confer any benefit on any third praty (whether referred to herein by name, class, description or otherwise) or any right to enforce a term contained in this Agreement

This Agreement shall be governed by and interpreted in accordance with the laws of England and Wales whose courts shall have exclusive competent jurisdiction.