Jonathan Friend v Friend Media Technology Systems Limited

On a summary judgment application involving contractual construction, the court may decide a short point of law where the evidence is sufficient and the parties have had a fair opportunity to address it. A clause reimbursing fees for advice about the interpretation and enforcement of transaction documents does not, without clearer language, indemnify litigation costs incurred in enforcing rights against the company. Contractual wording must be construed objectively, as a whole, and in its commercial context. Where the clause is at least arguably capable of covering some invoices, the defence cannot be struck out or summarily determined in the claimant’s favour.

The claimant, a founder and shareholder of the defendant company, sought reimbursement of legal fees and expenses incurred in several disputes under clause 19.4 of an Investment Agreement. He applied to strike out the Defence and obtain summary judgment, arguing that the clause covered advice and legal work connected with enforcement of the agreement and related documents. The company contended that the clause concerned transactional and non-contentious advice, not the costs of conducting litigation. It also relied on statutory restrictions concerning directors’ indemnities and the court’s costs jurisdiction. The issues were the proper construction of clause 19.4 and whether either party was entitled to summary judgment or strikeout.

1. Application refused. The claimant’s application to strike out the Defence and obtain summary judgment was dismissed. The court did not grant reverse summary judgment for the defendant.
2. The principles in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), as approved in AC Ward and Son v Catlin (Five) Ltd [2009] EWCA Civ 1098, applied. The court had to assess whether the claim or defence had a realistic prospect of success, avoid a mini-trial, and consider evidence reasonably expected to be available at trial. A short point of law or construction could nevertheless be decided summarily where the necessary evidence was before the court and the parties had an adequate opportunity to argue it.
3. For the requested declaration, the two-stage approach in Abaidildinov v Amin [2020] 1 WLR 5120 applied. The court first considered the defendant’s prospects on the underlying facts and matters. Only if those prospects were absent would it consider whether declaratory relief should be granted under CPR 40.20.
4. Applying the objective and unitary approach to contractual construction described in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The “Ocean Neptune”) [2018] 1 Lloyd’s Rep. 654, clause 19.4 concerned reimbursement for advice about the interpretation and enforcement of obligations in the transaction documents. “Enforcement” referred to the contractual obligations and duties, but did not extend the clause into a general indemnity for litigation costs.
5. The agreement’s structure supported that conclusion. Clause 14.2.4 dealt expressly with costs incurred in bringing claims and the sharing of litigation proceeds. Reading clause 19.4 as covering litigation would create substantial overlap and require the company to fund litigation against itself or related parties regardless of merits or outcome. The better construction confined clause 19.4 principally to non-contentious advice, including advice where a dispute about contractual meaning emerged.
6. Although the court reached a firm conclusion on construction, the Defence would still disclose reasonable grounds and possess a real prospect of success if any doubt remained. Reverse summary judgment was inappropriate because no substantive application had been made on that basis and some earlier invoices might relate to qualifying advice. The parties were left to consider whether a declaration would serve any useful purpose and to make further submissions on the form of order and costs.