One World (GB) Ltd v Elite Mobile Ltd.

This case concerns SIM cards that are used in pre-pay mobile phones. According to Mr Elliott approximately 600,000 such SIM cards are sold every month.

Elite Mobile Limited (“Elite”) is a substantial business which (amongst other things) supplies SIM cards to various distributors. It acquires the SIM cards from various network providers and usually pays £1 per card. One World (GB) Limited (“OneWorld”) was such a distributor. It is common ground that between March and July 2010 Elite agreed to sell a number of SIM cards to OneWorld. The price charged by Elite (which is not in dispute) was approximately 25p per card (that is to say less than the priced paid by Elite). It is further common ground that Elite received a connection bonus from the network providers and that in certain circumstances Elite was liable to pay to OneWorld a connection bonus of approximately £3.50 per card in respect of each card which was bona fide connected to a network.

There is a real issue between the parties as to the conditions which OneWorld had to satisfy before such bonus became payable.

It is OneWorld’s case that a connection bonus is payable irrespective of the number of bona fide connections achieved by OneWorld. In these proceedings OneWorld accordingly seeks an account of the number of connections achieved and payment of the sums found due in respect of the account.

It is Elite’s case that before any connection bonus was payable OneWorld had to achieve a connection rate threshold of 40%. It is Elite’s case the connection rate achieved was less than the threshold. Thus no connection bonus is payable at all. It is Elite’s case that OneWorld has not paid for all of the SIM cards and it accordingly Counterclaims in respect of sums due in respect of those cards.

It is common ground that at this hearing the court cannot determine questions of quantum. Thus it cannot determine the number of connections achieved by OneWorld. Equally if Elite is correct it cannot determine whether or not the 40% connection rate has been achieved. Thus the principal question to be determined is whether it was a term of the agreement that a 40% connection threshold had to be achieved and if so what was involved in meeting the threshold.

Until the morning of the trial Elite’s pleaded case on incorporation was contained in paragraphs 6 and 7 of the Defence. In summary it was alleged that negotiations took place between Mr Mughal on behalf of OneWorld and Mr Elliott on behalf of Elite. The negotiations were conducted orally and by e-mail mainly in March 2010. It was Elite’s case that on about 8^th March 2010 it provided OneWorld with a document (the SIM Supply Agreement) which contained in clause 1.4:

It was also alleged that it was orally agreed that the parties would deal with each other on the basis of the SIM Supply Agreement. These allegations were denied in paragraph 4 of the Reply. It was there alleged that OneWorld was not aware of the SIM Supply Agreement. It was not received by OneWorld as alleged and was not discussed with Elite’s representatives.

Some 8 days before the commencement of the trial Elite’s representatives found in an archive documents that came into existence at or shortly after the first meeting between the parties on 3^rd March 2010. These documents included a Business Registration Form signed by Mr Mughal in support of an application for credit. Immediately above Mr Mughal’s signature is a rubric including a statement that:

There is a dispute as to what terms and conditions were attached. Elite alleges that the document (286f) is a document headed – SIM CARD TERMS AND CONDITIONS OF SALE (“the SIM Card Terms”). If so it includes a clause about the payment of connection bonus that has been sold to a genuine consumer and subsequently activated to the relevant network. Reliance has been placed on the following clauses:

Elite allege in the alternative that this clause was incorporated as a result of Mr Mughal’s signature and his acceptance of the terms and conditions. Mr Mughal says that the SIM Card Terms document was not “attached” to the Business Registration Form and thus the terms were not incorporated. He says that he would never have agreed to a term incorporating a minimum threshold. He points to an invoice dated 9^th March 2010 which has terms and conditions on the back (“the Invoice Terms and Conditions”) and refers to the Business Registration Form. Those terms do not include a minimum threshold.

Despite the lateness of the application it seemed to me that this document was so central to the issues in the case that I permitted Elite to amend to rely on this document.

OneWorld was incorporated on 8^th January 2009. Mr Mughal is the sole director and shareholder. The abbreviated accounts filed at Companies House show net assets of £6,203 for the year ending 31/1/2011 and net liabilities of £2,149 for the year ending 31 January 2012. Mr Mughal has been involved with a number of other companies which have become insolvent or have been dissolved. In evidence Mr Mughal told me that he had been involved in the distribution of SIM cards for 10 to 11 years and had dealings with 5 other distributors of SIM cards. He said that he had never contracted on the basis of a threshold connection rate.

At the trial evidence was given on behalf of OneWorld by Mr Mughal and Mr Khan. Mr Khan is an accountant who has worked closely with Mr Mughal for around 5 years. He has access to all of Mr Mughal’s e-mails and was in the same room when the contract between OneWorld and Elite was negotiated on 3^rd March 2010.

Although English is not Mr Mughal’s first language he gave evidence without an interpreter. Having heard him give evidence for over half a day I would describe his English as adequate rather than good. A number of questions that had to be repeated so that he understood them and a number of his answers indicated that he had not properly understood the question.

Elite is a substantial business with a turnover in excess of £100 million. It has a number of employees. Mr Gokani, the Managing Director and Mr Elliott, the Pre-Pay Sales Director gave evidence. Mr Gokani was not involved in the initial meeting between the parties but was involved in the decision to grant OneWorld credit and also had a number of conversations with Mr Mughal. Mr Elliott was involved with the discussions on 3^rd March 2010 when the Business Registration Form was signed. He also had a number of further conversations and e-mail exchanges with Mr Mughal.

As already noted Elite received a fee from the network provider in respect of each SIM card that was activated by a bona fide customer. The precise sum received by Elite was not in evidence and may well have varied between networks. At one time in his evidence Mr Gokani mentioned a figure of £6. Most SIM cards have limited life. This varies between networks but appears to be between 6 months and 2 years.

It is thus very much in Elite’s interest that the distributor to whom it supplies SIM cards achieves a high rate of activations. Furthermore if the SIM cards are sold at a loss Elite need a level of activations before it shows an overall profit. According to Mr Gokani this break even point was 30%. In such a situation it was Elite’s policy to apply a connection threshold of 40% before any connection bonus was paid over to its distributor. It is not Elite’s case that this was a universal custom of the trade.

Mr Mughal was well aware that it was in both OneWorld and Elite’s interests to achieve a high activation rate. When asked about the SIM cards that he purchased he said that he gave away the vast majority of them to shopkeepers in the north of England. At one stage he said this was as much as 98%. Very few of the shopkeepers would be entitled to commission or a connection bonus. However he had 5 or 6 sub agents to whom he had supplied some of the SIMs and they were each entitled to commission/connection bonus of around £1 per connection. None of these had activation thresholds.

He was aware that some companies imposed such thresholds but he said that he would never have agreed to one. He had in the past had dealings with five SIM supply companies and had never agreed to a connection threshold. If he had been asked to agree such a threshold he would have bought his SIM cards elsewhere. He was aware that some companies did include such a term. However in paragraph 29 of his witness statement he said that that he thought that it was in more modern contracts.

It is common ground that the main terms of the contract were discussed at the meeting on 3^rd March 2010 between Mr Mughal and Mr Elliott. It was at that meeting that Mr Mughal signed the Business Registration Form.

It was rare for Mr Elliott to attend such a meeting. It would normally have been conducted by one Elite’s more junior employees. He said that he attended one or two a year. He attended this one because of a request from a sales manager at Vodafone and because of an introduction from a Mr Kurton.

Mr Elliott’s objective was to see if OneWorld had a legitimate business and if so whether Elite wanted to do business with OneWorld. He pointed out that Elite have agreements with network suppliers and obligations to them. In those circumstances Elite had to be careful when it selected its distributors.

Mr Elliott arrived at about 12.30. The meeting lasted for about 2 hours including lunch. Mr Elliott described himself as being impressed with the set up. He noticed a stock room with lots of stock and a salesman’s board. He said that Mr Mughal was insistent that he would give Elite good business and said he could achieve 80% activation rates on Vodafone SIMS. This rate was high – according to Mr Elliott the average activation rate was 70% - so Mr Elliott queried how it could be achieved. Mr Mughal told Mr Elliott that he had hundreds of retailers in the north of England and 30 salesmen on the road. Mr Elliott said that he noticed some vans with network markings on them parked round the corner and was thus satisfied with the explanation.

Mr Elliott said that Mr Mughal’s principal concern was obtaining stock. He asked whether Elite could supply 40,000 Vodafone SIMS. At that stage there was a discussion on price. The parties agreed a price of 50p per SIM card and Mr Elliott agreed to pay £3.50 for each activation to a bona fide customer.

At the outset of his evidence Mr Elliott accepted that he had no recollection of mentioning the 40% threshold during the course of the meeting. Later in his evidence he went further and said that he probably did not mention it. He agreed that it was an important term but said that it did not occur to him to mention it because Mr Mughal said he was going to achieve an 80% connection rate and thus the threshold would not be an issue.

Mr Mughal asked how quickly Elite could supply SIM cards. Mr Elliott told him that he needed to open an account. It was at this stage that Mr Elliott produced from his brief case the Business Registration Form which comprised 3 sheets of paper and another sheet of paper - the SIM Card Terms. The four sheets were not stapled together at that stage. It was suggested to Mr Elliott that the terms and conditions he produced were not the SIM Card Terms. However Mr Elliott’s evidence was that he had forgotten all about it until they were recovered from the archives, but he said he could now remember having provided them.

The SIM Card Terms were drafted by Mr Elliott some time in late 2009 or early 2010. There are 5 clauses though each of the clauses has a number of sub-clauses. They provide a framework for the contracts for the supply of SIM cards. Clause 3 is concerned with the connection bonus. It provides for the payment of such a bonus where the SIM card has been sold to a genuine consumer and has been subsequently activated. Clause 3.4 deals with the connection threshold and is in the terms set out above.

The Business Registration Form, which included an application for a credit limit of £15,000 per month was filled in by Mr Elliott with details supplied by Mr Mughal. It was handed over to Mr Mughal for signature and was duly signed by him under the rubric accepting the “attached terms and conditions”. Mr Elliott did not think that Mr Mughal read the terms and conditions. From Mr Mughal’s point of view it was imperative to complete the documents so that the account could be opened. Mr Mughal was asked to provide a copy of a utility bill, his passport and OneWorld’s Certificate of Incorporation document. Each of these were duly photocopied and given to him. Mr Elliott placed the documents back in his briefcase and handed them to the accounts department within 24 hours.

Mr Elliott also agreed that there was a discussion about the supply of connection reports. He agreed that he told Mr Mughal that Elite would supply connection reports on a monthly basis. He did not accept that he said that payment would be made on the 20^th to 25^th of the following month.

There was in fact much common ground between Mr Mughal’s recollection and that of Mr Elliott. Mr Mughal agreed that he was introduced to Elite via Mr Kurton. He agreed that he told Mr Elliott that he had achieved 80% activation rates with Vodafone and that this was an attractive selling point. He was aware that it was in both parties interests to achieve a high activation rate. He agreed that he told Mr Elliott that he had a team of agents in the north. He agreed that he was keen to do business with Elite.

Mr Mughal was adamant that Mr Elliott did not mention any connection threshold either during the negotiations about the price or whilst the Business Registration Form was being completed. He said there was no discussion about payment of the connection threshold. Mr Elliott told him that he would be sent a report between the 20^th and 25^th of each month and that he would be paid the connection bonus within 2 or 3 days of the report.

Mr Mughal agreed that Mr Elliott had completed the Business Registration Form and that he had signed it. He agreed that he was shown a document with Terms and Conditions on it. He did not, however, think it was the SIM Card Terms document relied on by Mr Elliott. He said that he did look at the document and tried to read it carefully. He did not see a minimum threshold clause.

He was shown the Invoice Terms and Conditions and thought that those might have been the ones he was shown. In fact the Invoice Terms and Conditions comprise some 31 terms in small print. They do not include any provision for a connection bonus or a threshold before which such bonus is paid. In his evidence Mr Elliott confirmed that prior to 2010 the Invoice Terms and Conditions were indeed the terms and conditions attached to the Business Registration Form. However he said that he drafted the SIM Card Terms in late 2009 or early 2010 and it was those terms and conditions that he took to the meeting on 3^rd March 2010 and showed to Mr Mughal.

Mr Khan was in the same room as Mr Mughal and Mr Elliott and overheard much of what was said at the meeting. He said that he was only about 2 yards from them. He was responsible for making the photocopies of the documents which were given to Mr Elliott. He confirmed that nothing was said about a connection threshold. As far as he could recollect there was no discussion about the terms and conditions and, like Mr Elliott, he did not think that Mr Mughal read them.

On 4^th March 2010 OneWorld’s account was authorised by Mr Gokani although the application for credit took a little longer. Mr Elliott sent Mr Mughal an email thanking him for meeting on previous day. It informed him that Elite was processing his credit application, that the account would be in their system by 5 March, but that credit facility would take a little longer

“so in the meantime we can start trading with you on either a credit card or T/T basis”.

Mr Elliott offered improved terms on the price of SIM cards and slightly higher connection bonuses in respect of some networks. He then set out the mechanism for payment of the connection bonus:

“We will produce a monthly statement of the connections by network and the connection commission due to you. Payment will be made by BACS transfer into your account. We receive connection data from the networks during the month after connection. By the end of that month we will have sorted the data by account and the Connection Statement will be produced by the beginning of the following month. Bacs payment will follow shortly after the issuing of the Connection Statement.”

The first order was made on 5^th March 2010. The precise details are set out in a series of e-mails sent by Mr Elliott to Mr Mughal. In summary there were further negotiations on the price which was reduced to 25p for each SIM Card with a reduced connection bonus. OneWorld agreed to purchase a total of 14,000 SIM cards for a total price of £4,112.50 inclusive of VAT. Mr Mughal was required to pay the £4,112.50 prior to delivery. The £4,112.50 was duly paid and credited to Elite’s account on 8^th March 2010.

Mr Jory drew to my attention the Invoice Terms and Conditions on the back of the invoices that were sent to OneWorld and which included:

At some stage shortly thereafter OneWorld was offered credit facilities of up to £20,000.

At some stage a bundle of documents including the Business Registration Form, the SIM Card Terms, the photocopies of the utility bill, Mr Mughal’s passport and the Certificate of Incorporation were filed in Elite’s archives. There is no evidence of what happened to them between the time when Mr Elliott handed them to the accounts department and they were filed and thus it is possible that the terms and conditions that were filed were not those that Mr Elliott showed to Mr Mughal. It is, however, accepted on behalf of OneWorld, that the terms and conditions that were retrieved from the archive shortly before the trial were the SIM Card Terms.

On or about 8^th March 2010 Mr Gokani drafted on his computer the SIM Supply Agreement detailing the terms and conditions agreed between OneWorld and Elite. It is a two page document comprising some 6 clauses (somewhat curiously numbered) and a Schedule. The address for OneWorld was Mr Mughal’s home address which was also the registered office rather than the trading address of OneWorld. However the postcode was incorrect being neither that of the registered office or the trading address.

The Schedule contains the agreements as to price – that is to say 25p per SIM card and connection bonuses between £3 and £4 depending on the network. Clause 4.3 provides for a term of 12 months with the agreement then being terminable on 90 days notice.

Clauses 1.3 and 1.4 deal with the payment of connection bonuses and include the provision for a 40% connection threshold set out above.

It is pleaded in the Defence that the terms of the SIM Supply Agreement were orally agreed between OneWorld and Elite. Mr Mughal denied this. Neither Mr Gokani nor Mr Elliott was able to give any evidence of any such oral agreement. Thus it is perfectly plain that there was no such agreement.

It is pleaded in the Defence that the SIM Supply Agreement was “provided” to OneWorld. Mr Mughal denies this. He says that the first time he saw it was when a copy was sent by Elite’s solicitors on 11^th February 2011. Elite invite the Court to infer that the SIM Supply Agreement was sent by post to OneWorld on or about 8^th March 2011. There is no documentary evidence to support this. Thus there is no evidence that the SIM Supply Agreement was printed on 8^th March 2011; there is no covering letter or e-mail addressed to Mr Mughal or OneWorld enclosing the SIM Supply Agreement. There is no evidence of any document being posted to OneWorld on that date.

There is also no direct oral evidence to support the claim. Unsurprisingly Mr Gokani has no recollection of printing the SIM Supply Agreement and giving it to the Office Manager – Jasvanti Hirani - to post. Unsurprisingly Jasvanti Hirani has no actual recollection of addressing an envelope and posting the SIM Supply Agreement to OneWorld. All she can do is to set out her normal practice and to give evidence of what would have happened if that practice had been followed.

Mr Jory has produced a detailed chronology of the events that followed 8^th March 2010. Most of them are relatively uncontroversial. However in the light of the issues that I have to decide it is not necessary to set them out in detail. It is sufficient to provide a summary:

It is common ground that Mr Mughal placed a number of orders for a large number of SIM cards between 5^th March 2010 and 15^th July 2010. Some (but not all) of the orders are set out in paragraphs 5 and 10 of the Particulars of Claim. All of the ordered SIM cards were delivered. On 1^st July 2010 OneWorld paid a further £10,590 to Elite. In paragraph 22 of the Defence and Counterclaim Elite assert that there is a balance of £50,301.50 due in respect of the price of the SIM cards supplied. Although OneWorld does not seriously challenge the amount claimed it contends that any sum due should be set off against the connection bonus to which it is entitled.

On 25^th March 2010 Mr Gokani emailed Mr Mughal following a telephone conversation. In the e-mail he set out prices of SIMs, connection payments, and life of SIM per network and said:

“we pay commission usually on the following month 20-25^th. We pay by BAC’s so we would contra any monies owed to Elite before we would make your payment

On 26^th April 2010 Mr Gokani met with Mr Mughal at his offices in Bradford. According to Mr Gokani they discussed opportunities in the market, what Mr Mughal was doing. Mr Mughal claimed to have 30 people working “on the road” in the North of England and this was how he could achieve such high connections. Mr Mughal also asked Mr Gokani whether Elite would offer additional bonuses as he was confident that he could achieve high connection rates.

On 7^th May 2010 Mr Gokani e-mailed Mr Mughal. In the e-mail he offered an additional 50p bonus for each network if specified connection rates were achieved. The e-mail did not mention any connection threshold. Furthermore in respect of 4 of the networks the specified connection rate was only 40%.

There is no doubt that some reports were sent to OneWorld up to September 2010. As there was no definition of what was to be included in a “connection report” it is difficult for me to say that they were not “connection reports” within the meaning of Mr Elliott’s e-mail of 4^th March 2010. The reports showed relatively low connection rates.

According to Mr Elliott and Mr Gokani in August or September 2010 O2 instructed Elite to stop supplying OneWorld as its level of fraudulent connections was too high. They also claim that they had a similar request from Vodafone in November or December 2010. [It should be noted that a fraudulent connection does not necessarily involve any fraud on the part of OneWorld. It could just as easily be attributable to the shopkeepers or subagents to whom Mr Mughal had supplied the SIM cards.]

On 13 December 2010 Mr Mughal e-mailed Mr Gokani. In the e-mail he said that he was waiting for SIM activation reports for the last 3 months, that he was embarrassed because his sub-agents were coming to his office asking for commissions. He said

“Please do me a favour and send me a activation report because I want to know about % of activation and I can more push in the market for more activation. According to my experience during charismas and new year activation level always be a double” (sic).

Solicitors became involved at the beginning of 2011. On 3^rd February 2011 Last Cawthra Feather, on behalf of OneWorld, wrote a letter before action to Mr Gokani. On 11^th February 2011 Gandecha & Pau replied on behalf Elite and enclosed the SIM Supply Agreement which it alleged governed the contracts between the parties. On 1st April 2011 Last Cawthra Feather wrote asserting that OneWorld had never seen the SIM Supply Agreement before it was sent on 11th February 2011. When he gave evidence Mr Mughal confirmed that he had never seen the SIM Supply Agreement. He acknowledged that the registered office of OneWorld was his home address and that a number of documents addressed to OneWorld were accordingly delivered to his home. He said it was his practice to take them to the office. He said that mail coming to the office is checked both by himself and Mr Khan. He said that if mail arrives a file is opened and it is placed on the file.

These proceedings were issued on 23^rd June 2011. It is not necessary to set out the history of the proceedings.

Whilst there were differences in recollection between the various witnesses I formed the impression that all of those who gave evidence before me were honest witnesses doing their best to assist me. With that in mind I make the following findings of fact:

I am satisfied that there was no mention of a minimum threshold by either Mr Elliott or Mr Gokani at any time when any of the contracts were being negotiated. Each of them, at various times, agreed a price that Elite would pay in relation to activated connections but at no time did either of them mention that the price was subject to OneWorld obtaining a connection threshold.

I accept the evidence of Mr Elliott in relation to the Terms and Conditions. No Terms were actually “attached” to the Business Registration Form in the sense that no Terms and Conditions were actually stapled to it. However I am satisfied on balance of probabilities that Mr Mughal was shown the SIM Card Terms rather than any other terms and Conditions such as the Invoice Terms and Conditions. Mr Elliott had drafted the SIM Card Terms and thus these are the terms he would have wanted to bring. More importantly the SIM Card Terms were in Elite’s archives with the rest of the documents. There is no dispute that the other documents - the Business Registration Form, the Company Registration Form, the photocopies of Mr Mughal’s passport and utility bill – were correctly filed in the archive. Whilst it is possible that the wrong terms and conditions were filed it is an unlikely scenario.

Although Mr Mughal was shown the SIM Card Terms I find as a fact that he did not read them. On this aspect of the case I prefer the evidence of Mr Elliott and Mr Khan to that of Mr Mughal. It also follows from Mr Elliott’s evidence that Mr Elliott was aware that Mr Mughal had not read the SIM Card Terms. In those circumstances I make no finding as to whether if Mr Mughal had read the SIM Card Terms he would have understood them. I have already noted that his English was adequate rather than good and it is noticeable that Mr Mughal did not, in general, communicate in writing.

I am not satisfied on balance of probabilities that the SIM Supply Agreement was ever posted to OneWorld. The burden of proof on this issue rests with Elite and in my view Elite has failed to discharge it. There is no documentary evidence supporting the posting of the SIM Supply Agreement, there is no direct oral evidence so that Elite is forced to rely on evidence of its practice both in relation to Mr Gokani’s printing of the document and as to its posting by Ms Hirani. In my view this is insufficient to satisfy me on balance of probabilities that it was posted. Even if it was posted in accordance with Elite’s practice it was not correctly addressed. In the result I am not satisfied that it was received and I accept Mr Mughal’s evidence that it was not.

I reject the allegation pleaded in paragraph 7.9 of the Defence that the terms of the SIM Supply Agreement were agreed orally between the parties. I find that there were no oral discussions at all as to the terms of the SIM Supply Agreement.

In L'Estrange v F Graucob Ltd [1934] 2 KB at p 403, Scrutton LJ said:

There have been a number of relatively recent cases where this rule has been considered. They start with the decision in Interfoto Picture Library v Stiletto Visual Programmes [1989] 1 QB 433. This was not a case where the document was signed but it is a case where there are observations to the effect that unusual or onerous terms must be brought to the attention of the other party. Attempts have been made to make an exception to the rule in L'Estrange v F Graucob Ltd where the clause is unusual or onerous.

I am extremely grateful to Counsel for taking me through the relevant authorities. I agree with Mr Stacey that the effect of the authorities was summarised by Andrew Popplewell QC (as he then was) in paragraphs 90 – 92 of Do-Buy 925 Ltd v National Westminster [2010] EWHC 2862:

In paragraphs 85 – 90 of his closing submissions Mr Jory submits that it would not be fair to hold that OneWorld was bound by condition 3.4. He relies on the following matters. Mr Mughal was at a disadvantage in dealing in the English language; Mr Elliott did not refer to the 40% threshold during the meeting of 3^rd March 2008. Indeed the threshold was not mentioned throughout the period when the parties were trading. No copy of the SIM Card Terms was ever sent or given to Mr Mughal. He was however supplied with invoices containing the Invoice Terms and Conditions on the back. There was no evidence before the court that terms such as clause 3.4 were common in the industry. The burden of proof on this issue lay on Elite and it has failed to discharge it. Such evidence as Mr Mughal produced showed that he would never have contracted on the basis of a minimum threshold.

Mr Stacey seeks to answer these points in paragraph 37 of his closing submissions. He submits that it is for OneWorld to establish that the clause is onerous or unusual. The contract was entered into by two commercial entities experienced in business generally and the SIM card distribution business specifically. It is not suggested that Mr Mughal was rushed into signing and did not have an opportunity – had he wished – to read it carefully or take legal advice on it. The clause was clearly contained on one page of comparatively large print – indeed the 40% minimum connection threshold was mentioned twice. In paragraph 2 of the Reply Mr Mughal accepted that he was “aware of the existence of percentage thresholds within the industry”. On 1^st April 2011 OneWorld’s solicitors wrote a letter which included:

Mr Mughal had spoken of his 80% or better connection rates with Vodafone and the general high level of connections he would obtain. In those circumstances the requirement of a 40% connection threshold before a connection bonus is payable cannot be regarded as onerous.

During the interval between the conclusion of the evidence and closing submissions I raised the question with Counsel of whether it might be possible to allege that the failure of Mr Elliott to mention the threshold payment on the 3^rd March 2008 might amount to a misrepresentation so as to enable OneWorld to avoid the rule in L'Estrange v F Graucob Ltd. There have been two cases where such misrepresentations have been found. [See Jacques v Lloyd D George [1968] 1 WLR 625 and Curtis v Chemical Cleaning and Dyeing [1951] 1 KB 805].

Mr Stacey took me with care through the authorities and submitted, for a number of reasons that OneWorld could not rely on misrepresentation on the facts of this case. Mr Jory supported Mr Stacey’s submissions and made no application to amend his pleading so as to rely on misrepresentation. In those circumstances I shall say no more about misrepresentation.

In the light of the authorities I am content to assume (without deciding) that there is a possible exception to the rule in L'Estrange v F Graucob Ltd in relation to provisions that are onerous or unusual. However I agree with Mr Stacey that on the facts of this case the requirement of a 40% threshold before a connection bonus is paid is neither unusual nor onerous. To my mind the reasons given by Mr Stacey are compelling. Mr Jory is correct that there is no detailed evidence as to how common such clauses are. However the matters referred to by Mr Stacey together with paragraph 29 of Mr Mughal’s witness statement satisfy me that the clause is not sufficiently unusual so as to enable Mr Mughal to avoid the rule. Equally this is a case where Mr Mughal was fully aware of the need for a high connection rate. He had himself spoken of the 80% he had achieved for Vodafone. In those circumstances I do not regard the clause as onerous even if, as Mr Jory pointed out, it applied to networks other than Vodafone.

There was some debate before me as to whether Mr Elliott refused to supply a copy of the Business Registration Form and the terms. I do not accept that there was any such refusal. There was nothing to prevent Mr Mughal from making a copy of the Business Registration Form when he signed it. He chose not to do so. I am equally satisfied that if he had asked for a copy it would have been supplied.

It follows I accept Mr Stacey’s submission that the SIM Card Terms were incorporated into the contract on 3^rd March 2010 by reason of Mr Mughal’s signature on the Business Registration Form which incorporated those terms.

Mr Jory then ingeniously submitted that the SIM Card Terms only applied to the first contract between OneWorld and Elite. He submitted that the Invoice Terms and Conditions (which were on the back of each invoice) were incorporated in all contracts after the first one and that by virtue of clause 1 these applied in place of and prevailed over the SIM Card Terms.

Ingenious as this submission undoubtedly is I cannot accept it. First I am not satisfied that the Invoice Terms and Conditions were ever incorporated into contracts at all. It is common ground that the Invoice is a post contractual document in relation to the first contract. To my mind it by no means follows that the Terms on the back of the first invoice were incorporated into the second or subsequent contracts. Second the Invoice Terms and Conditions do not purport to deal with connection bonuses at all. There is no provision for payment of such a bonus in those terms. Mr Jory seeks to avoid this by reference to the e-mails agreeing to the connection bonuses which he submits are therefore incorporated. To my mind the obligation to pay a connection bonus is a separate contract outside the standard conditions of sale. However the obligation to pay a connection bonus is limited by the requirement to achieve the threshold connection rate. To my mind this obligation and limitation are not replaced by the Invoice Terms and Conditions.

It will be recalled that clause 3.4 provides:

The question arises as to what the parties meant by the word “shipment”. Various suggestions have been made. Each of the orders contained orders for multiple SIM cards in respect of different networks. One suggestion was that in order for a connection bonus in respect of any network to be paid OneWorld had to achieve a 40% connection rate in respect of that network for each order. Another suggestion was that OneWorld had to achieve a 40% connection rate overall in respect of each order. A third suggestion was that OneWorld had to achieve 40% of each part of the order if the order was shipped at different times.

The principles relating to construction are well-known and set out in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912F-913G; Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101 at [14]-[15] and [21]-[25] and Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 at [21]-[30]. They may be summarised:

To my mind there is ambiguity in what the parties meant by “shipment”. It is to my mind unlikely that they meant that if an order was shipped in a number of different parcels on different occasions that OneWorld had to achieve 40% of each parcel. The organisation of the shipments was entirely outside the control of OneWorld. Equally if the parties had intended that the 40% should apply to individual networks it would have been perfectly easy to provide for it. They did not do so.

In my judgment the reasonable person would have understood the parties to mean that OneWorld had to achieve an overall 40% connection rate in respect of each order before the connection threshold was met.

As part of the duty to account Elite had to provide OneWorld with sufficient information to enable OneWorld to know how much money was due in respect of connection bonuses and whether the connection thresholds in respect of each order have been met.

There is no doubt that some information has been provided to OneWorld for the period up to September 2010. The information might enable a calculation of the connection bonuses but, as I understand it, would not enable OneWorld to see whether the connection threshold has been met in respect of any particular order. Equally information after September 2010 was not provided until after the commencement of these proceedings. Furthermore it has been provided in a form that is not easily digestible without expert assistance.

Now that the court has determined the contract terms it may be necessary to make further orders to enable the parties to determine whether or not the threshold has been met in any of the contracts.

I conclude that the SIM Supply Agreement was not incorporated into the contracts but that the SIM Card Terms were incorporated into the contracts for the payment of the connection bonus.