Primus Telecommunications Plc v MCI Worldcom International Inc.

Summary judgment must be refused where a defence or counterclaim has a real prospect of success and the meaning, significance or reliance attributable to oral statements may be better assessed after hearing the witnesses. An agent who lacks authority to conclude a transaction may nevertheless have apparent authority to make representations of fact.

Whether words constitute a representation, and their nature, are generally assessed objectively by reference to their expected impact on a reasonable representee in the actual representee’s position and with their known characteristics. A statement about future expectations may imply an assurance about present circumstances or matters presently known to the representor.

The defendant telecommunications company appealed from Colman J’s judgment in the Commercial Court, [2003] EWHC 2182 (Comm). The judge had refused amendments to its defence and counterclaim and had entered summary judgment for the claimant for unpaid circuit rentals and the price of an upgraded circuit.

The proposed case concerned rectification and breach of an agreement for a telecommunications circuit, the effect of a later upgrade agreement, and alleged representations about the claimant’s financial strength and future solvency. The defendant also sought to advance issues concerning an implied term, economic duress and defective performance. The central question was whether those proposed defences and counterclaims had a real prospect of success requiring a trial.

1. Appeal allowed unanimously. Primus had shown real prospects of establishing its proposed defences and counterclaims. The summary judgment and refusal of the material amendments could not stand.

2. On the evidence which had to be assumed true at this stage, the Upgrade Agreement might have been entered into under protest after WorldCom refused to perform its prior contractual duty. The agreement contained no language of compromise, affirmation or abandonment of existing rights. It was therefore arguable that it neither barred rectification of the Third Agreement nor extinguished a claim for damages arising from its breach. Any objective value received through the larger circuit might reduce damages, but did not eliminate the arguable claim.

3. Delay, affirmation, acquiescence and laches could not be determined summarily. Whether it would be inequitable to permit rectification required fuller examination of the parties’ conduct and circumstances. Termination under the agreement’s insolvency clause did not clearly bar rectification pursued to support a damages claim arising from earlier and unrelated events.

4. Primus could amend to allege an implied term under section 9 of the Sale of Goods and Service Act 1982 that the circuit would be configured so as to be usable and fit for its known requirements. Its proposed economic-duress amendment was remitted to the Commercial Court because the circumstances leading to the Upgrade Agreement would in any event be tried.

5. The alleged assurances about WorldCom’s financial strength and continued existence also raised a triable misrepresentation case. An agent without apparent authority to conclude a transaction may nevertheless possess apparent authority to make factual representations: First Energy [1993] 2 Lloyd’s R. 194. Whether words constitute a representation, and its nature, is generally assessed objectively according to their expected impact on a reasonable representee in the actual representee’s position and with their known characteristics. A prediction may, depending on context, imply an assurance about existing circumstances or present knowledge.

6. The issues of economic duress and defective performance, including quantified loss and alleged breach through service outages, were remitted so that appropriate amendment applications could be renewed in the Commercial Court. An extension of time for the appeal was granted insofar as necessary.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. Summary judgment was set aside, material amendments were permitted, and further proposed amendments concerning economic duress and defective performance were remitted to the Commercial Court.
2. Commercial Court: Colman J, in [2003] EWHC 2182 (Comm), refused Primus’s application to amend its defence and counterclaim and entered summary judgment for WorldCom because Primus had no real prospect of succeeding.