ASIF MAHMOOD v THE BIG BUS COMPANY

Commercial heads of terms may contain both binding and non-binding provisions. The question is whether the particular provision, objectively construed in context, shows an intention to create legal relations and contains sufficiently certain obligations.

An exclusivity obligation may be enforceable without amounting to an agreement to negotiate. An anti-circumvention clause may impose a continuing obligation not to take positive steps to exclude the counterparty from the specific venture contemplated. Where breach deprives a claimant of a valuable contractual right protecting an idea, information and contacts, negotiating damages may be an appropriate measure of loss.

The claimant alleged that heads of terms agreed in 2001 with the defendant created binding obligations concerning a proposed Dubai sightseeing-bus venture. He relied principally on exclusivity and anti-circumvention provisions. The defendant argued that the agreement was governed by UAE law, that the claim was time-barred, that the heads of terms were non-binding or superseded by the 2002 corporate structure, and that the claimant had suffered no recoverable loss.

The court determined the applicable law, enforceability and scope of the relevant clauses, the effect of the 2002 structure, limitation, breach, causation and the availability of negotiating damages.

1. Applicable law and limitation. The Heads of Terms were governed by English law under Articles 3 and 4 of the Rome Convention. The agreement concerned London-based negotiations and obligations principally to be performed by the defendant in England. If UAE law applied, the claim would nevertheless be in time under the 15-year period in Article (473) of the UAE Civil Code, because Article (95) of the UAE Commercial Transactions Law applied only where both parties were traders.

2. Binding obligations. Applying the objective approach in RTS Ltd v Molkerei Alois Muller Gmbh [2010] UKSC 14, the Heads of Terms contained both binding and non-binding provisions. Clause 1 created an enforceable exclusivity obligation not to start or continue discussions with others about sightseeing tours in the UAE until the parties agreed in writing not to proceed. Clause 2 also imposed a binding confidentiality obligation. Clause 5 was too uncertain to be enforceable.

3. Anti-circumvention obligation. Clause 7 did not require good-faith negotiation and was not void as an indefinite lock-out provision. Properly construed in context, “circumvent” meant taking a positive step to evade or avoid the claimant’s involvement in a tourist-bus business in Dubai. The obligation applied to the defendant, not its individual shareholders, and was confined to Dubai rather than the UAE generally. It could continue after termination or absence of a formal joint-venture agreement.

4. Effect of the 2002 structure. The claimant’s acquiescence in the 2002 structure waived continuing rights under clause 1. It did not waive clause 7, because he had not agreed to give up his continuing interest in participating in a Dubai venture with the defendant.

5. Breach and continuing breach. In 2004 the defendant terminated the arrangements with Big Bus Dubai, called in inter-company loans, and entered into new leasing, licensing and technical-assistance agreements with Double Decker. Those positive steps attempted to circumvent the claimant. The defendant’s continuing facilitation of Double Decker’s business constituted a continuing breach, so the claim was not statute-barred. The defendant’s involvement in Big Bus Abu Dhabi did not breach clause 7.

6. Repudiatory breach and loss. No implied term requiring reasonable care and skill or prohibiting frustration was necessary. The claimant therefore committed no repudiatory breach of such a term. The breach of clause 7 caused loss. Following Morris-Garner v One Step (Support) Limited [2018] UKSC 20, negotiating damages could measure the value of the lost right to participate in the venture or release the defendant from the anti-circumvention obligation. Liability and causation were therefore established, with quantum and case-management directions left outstanding.

The claim was initially struck out on the basis that the Heads of Terms created no enforceable agreement. On appeal, Laing J set aside that order in [2017] EWHC 3582 (QB). The matter then proceeded to trial before the High Court, which upheld the claim on liability and causation, subject to determination of quantum.