Bell v Ivy Technology Ltd

On an application to amend, a court should not finally determine contractual construction where fuller admissible evidence may alter the result. For a disclosed and identified principal, excluding the principal’s rights or liabilities requires clear and unequivocal contractual language, and the burden is heavy. A clause excluding rights of third parties may not suffice where liability arises through an agent. The factual matrix may include the transaction’s genesis and aim, provided the material was known or reasonably available to all contracting parties. Subjective intentions and pre-contractual negotiations remain inadmissible to establish meaning. Contractual estoppel and election require attention to context. Election is factual, and proceedings against an agent are not necessarily unequivocal.

Ivy Technology Limited sought permission to amend its claim against Mr Bell to allege that Mr Martin had entered into a share purchase agreement as Mr Bell’s agent. The amendment would add claims against Mr Bell for breach of contractual warranties.

Teare J granted permission by order dated 28 January 2020, with reasons given in [2020] EWHC 54 (Comm). Mr Bell appealed on three grounds: that the agreement excluded his liability; that Ivy was contractually estopped from asserting that he had an interest in the shares; and that Ivy had irrevocably elected to sue Mr Martin alone.

The central questions were whether those issues could be resolved summarily on the existing evidence and whether Ivy had a real prospect of establishing its proposed case.

Appeal dismissed. The issue was whether Ivy’s proposed amendments had a real prospect of success, not whether Mr Bell’s ultimate liability should be finally determined.

1. Disclosed principal. Ivy knew before the agreement that Mr Bell had a 50 per cent beneficial interest. The case was therefore properly characterised as one involving a disclosed principal. The approach in Filatona Trading Ltd v Navigator Equities Ltd [2020] EWCA Civ 109 applied. A heavy burden rests on a party seeking to establish that a known and identified principal’s rights or liabilities were excluded. The intention to exclude must appear clearly and unequivocally.
2. Construction and evidence. The stark discrepancy between the known beneficial ownership and the agreement’s terms required explanation. Evidence of the reason why Mr Bell was not named, if known or reasonably available to all contracting parties, could form part of the admissible factual matrix. Evidence of the transaction’s genesis and aim could be admissible, although subjective intentions and pre-contractual negotiations could not be used to establish contractual meaning. It was therefore premature to conclude that clause 15.12 or the other provisions necessarily excluded Mr Bell’s liability.
3. Contractual estoppel. Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386 and Richards v Wood [2014] EWCA Civ 327 recognised that contractual recitals may bind parties to an agreed state of affairs. The meaning and effect of the recitals in this agreement nevertheless required construction in the relevant factual context and could not be determined summarily.
4. Election. Election was a question of fact. The institution of proceedings against an agent was strong evidence but not necessarily a truly unequivocal act involving abandonment of the right to sue the principal. The context and all relevant circumstances had to be considered. Since Mr Martin was independently a principal for his own interest, suing him was not necessarily unequivocal. The issue required determination at trial.

Lord Justice Arnold further observed, obiter, that the statement in Playboy Club London Ltd v Banca Nazionale del Lavoro SP [2018] UKSC 43 that a third party must elect between suing agent and principal was made without reference to authority and was open to doubt, particularly if the liabilities were joint and several rather than alternative.

1. Court of Appeal (Civil Division): Dismissed Mr Bell’s appeal against the order granting permission to amend. [2020] EWCA Civ 1563.
2. High Court of Justice, Commercial Court: Teare J granted Ivy permission to amend by order dated 28 January 2020, with reasons given in [2020] EWHC 54 (Comm); the order is identified as [2020] EWHC 94 (Comm).