Neutral Citation Number: [2008] EWHC 943 (Ch)

Case No: HC06C04252
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 30/04/2008

Before :

THE HONORABLE MR JUSTICE EVANS-LOMBE
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Between :

	DNA Productions (Europe) Limited	Claimant	
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	(1)	Mr Rafi Manoukian
(2)	Mr Matthew James (trading as DNA Productions)	Defendant
Third Party	

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Gabriel Fadipe (instructed by Russell Jones & Walker) for the Claimant
Jeffrey Chapman (instructed by K & L Gates) for the Defendant

Hearing dates: 3/3/08 – 3/4/08
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Judgment

Mr Justice Evans-Lombe : 

1.	In this case the Claimant, DNA Productions (Europe) Limited (“DNA”) claims against the Defendant, Mr Rafi Manoukian (“M”) £201,073.25 and interest, being the balance DNA contend to be due under a contract made between DNA and M, in or about November 2005 (“the 2005 Agreement”),  for the provision to him of goods and services and for the arrangement and supervision of the supply of those goods and services to M by suppliers (“the Suppliers”) for the purposes of a party (“the 2005 Event”) for his friends, celebrating his fiftieth birthday and the christening of his daughter at premises made available to him by Sir Elton John.  In the proceedings, M counterclaims against DNA damages as a result of the performance of the 2005 Agreement by DNA and under Section 2(1) of the Misrepresentation Act 1967 and specific performance of DNA’s obligation to produce and deliver to M a souvenir video of the 2005 Event together with the master tapes and an assignment of the copyright of such video to M, or, alternatively, damages.  By a Part 20 Claim M claims against Mr Matthew James (“MJ”) an account of all sums, commissions or secret profits which he received from suppliers of goods and services in the performance of an agreement (“the 2001 Agreement”) whereby MJ agreed to arrange and supervise the supply of goods and services by suppliers for the purposes of a party (“the 2001 Event”) celebrating the christening of another of M’s daughters.  This Part 20 Claim is currently stayed and is not the subject of this trial. 
The background facts
2.	In 2001 MJ was conducting a business under the name “DNA Productions” of an events organiser for wealthy clients.  He was approached by M for the purpose of arranging the 2001 Event.  Initially, following his normal practice, MJ suggested a contract whereby he undertook to supply all the goods and services for the purposes of the required event for an all-in sum to be agreed with M (an “all-in contract”).  For this purpose, in a letter transmitted by fax dated 14th August 2001, MJ submitted a contract on his standard terms and conditions for a total contract sum of £358,200.21.  The 2001 Event was timed to take place in the middle of September 2001.  
3.	Also by fax dated 14th August MJ wrote to M:-
“This is to confirm the conditions on which DNA Productions supply event management and production services to clients.  The provision of products and services are subject to a commission applied by DNA Productions which generally will not exceed 10%.  Please note however that this does not mean 10% of the total contract.  Commission is applied by DNA at our discretion where appropriate.  As a general rule, areas such as entertainment, food, theming, design and other services that involve creative input or products/services sourced by DNA are subject to commissions and/or fees.  Other areas such as labour & staff, alcohol, transport, certain equipment, insurance etc. are generally not subject to fees and/or commission.”
4.	In response, MJ received a fax message from M’s accountant who, after referring to the complications for payment arising from M’s foreign domicile, continued:-
“Following the event you will render a final invoice which will be payable within 14 days and will be accompanied by all supporting invoices [sic] as agreed with Mr Manoukian.  For the avoidance of doubt, your commission should be in accordance with your letter dated 14th August 2001.”
  
On 16th August 2001 MJ again wrote to M submitting a revised quote.  The material parts of this letter are under the heading of “Terms and Conditions of Business” and read:-
“Following your request yesterday for our final invoice to be accompanied by “all supporting invoices” I am afraid this will not be possible.  Our terms & conditions of business are to provide you with products and services at the prices detailed in our quote & contract.  This contract is between yourself the client and DNA Productions as the company supplying those services.  Details of our suppliers and sub-contractors are a private matter.  This is standard practice within the event industry and all production companies operate in this way.
In my letter of 14th August 2001 I gave an indication of how we calculate our profits, explaining that the provision of products and services are subject to a commission applied by DNA at our discretion which generally doesn’t exceed 10%.  You will find this figure of 10% is standard across the industry – in fact most production companies will charge that (if not more) on the bottom line figure of the contract without the client ever being aware of how much profit they are making.  
I have also fully itemised the contract for you so that you can see the prices of most individual items.  This was intentional so you could see that prices were not being over-inflated.  Many production companies will group areas of the event together in a quote under vague headings such as “flowers” or “marquee” without fully itemising.  This is usually to hide the true cost of things and increase their profit margins.  
To provide you with invoices from our suppliers would compromise DNA Productions as a business.  On one occasion in the past a client has attempted to enter into separate contracts with our suppliers after all the work has been done by DNA Productions.
I hope you understand my position on this.”
5.	It appears that M was not satisfied with this and, as a result, he made an agreement with MJ that he would contract with suppliers direct and that MJ would charge a management fee of 10% of the total sum payable to suppliers as a result.  M would not negotiate directly with suppliers but MJ, acting as his agent, would do so.  This arrangement is recorded in a fax from M to MJ in the following terms:-
“I agree to the terms of employment as set out below: 
DNA Productions will act on my behalf the [sic] events managers for the christening and party on 15th September.  DNA Productions will liaise with all suppliers on all areas of the event – however all contracts for the supply of products and services will be between the supplier and myself as the client, with all invoices being addressed to me for payment.
As the client, I agree to pay DNA Productions an event management fee of 10% of the total of every supplier’s invoice that they have negotiated on my behalf with the exception of those listed below.  To avoid doubt this will include catering, marquee and production, technical, floral, design & print, theming and sets, entertainment, valet/security/events staff, those relating to the church service, miscellaneous, and any additional areas of the event that should arise.
DNA will not be paid a commission on the following:
-	Little Richard’s Fee
-	Accommodation and travel relating to Little Richard and his band.
I understand 75% of DNA’s event management fee will be billed in advance of the event as a deposit along with the relevant suppliers’ invoices.”
The letter was signed by M and dated 17th August 2001.  It is M’s contention that, at the time he signed it, he added, in what is accepted as being his handwriting, the following postscript:-
“For the avoidance of doubt, DNA Productions or any of its officers shall not receive any commission directly or indirectly from these suppliers as a result of this event.”
6.	DNA have produced the original hard copy of this fax without the hand-written postscript.  M has produced a version with the hand-written postscript and two stickers with words written on them by him attached to the top.  Each side accuses the other of producing a forged document. In the result I do not have to resolve this issue.  
7.	It was MJ’s evidence, on which he was not challenged, that it is customary for suppliers to the party management industry to offer a trade discount, usually 10%, to encourage managers to employ their services.  It follows that there is a two-tier pricing system in this business where the price to an ordinary member of the public, dealt with by a supplier direct, was usually 10% more than the price that a supplier would give to a manager who was himself dealing with a client.  
8.	It was M’s evidence that he expected MJ, in his dealings with suppliers for the 2001 Event, to obtain for him the best prices for supplies obtainable, which would include giving him the benefit of any trade discounts available.  He was, however, unable to say whether that is what happened in the preparations for the 2001 Event.  MJ denied that he had taken any trade discounts or commissions for his own benefit.  In the light of what has occurred in the preparations for the 2005 Event, M contends that MJ received what amounted to trade discounts from suppliers he engaged for the purposes of the 2001 Event after that event had happened.  His claim to recover any such discounts or commissions is the subject of his Part 20 claim against MJ.
9.	Notwithstanding all of this, the 2001 Event seems to have gone off satisfactorily because M returned to MJ in 2005 to arrange the 2005 Event.  
10.	A preliminary discussion took place between M and MJ with relation to the 2005 Event on 5th May 2005.  Since the 2001 Event, the Claimant, DNA Productions (Europe) Limited (“DNA”), had been incorporated to carry on the business of party organiser previously conducted by MJ under the trading name DNA Productions.  At this time DNA employed a Miss Sarah Williamson as “creative director” and a Miss Victoria Smith as event producer and personal assistant to MJ, the latter joining DNA on 5th September 2005.  On 23rd September a meeting between M and MJ took place at M’s offices attended by Miss Smith and Miss Williamson and a Miss Angela Harvey, M’s personal assistant, for the first detailed discussion of M’s requirements for the 2005 Event.  Thereafter there was correspondence between DNA and its various suppliers to the detail of some of which I will later return.  
11.	On 7th November a meeting took place between M and MJ at which a detailed proposal prepared by DNA, setting out and costing the various constituents of the party comprising the 2005 Event, were discussed.  The meeting was attended by Miss Smith and Miss Williamson with MJ and Miss Harvey with M.  The document setting out the proposal gave a price that DNA was proposing to charge in respect of each of the constituent items, showing the VAT chargeable on each item and concluding with a “grand total” figure of £1,021,712.80 inclusive of VAT.
12.	That total figure was arrived at after deducting two figures of £12,807.50 and £3,378.13 in respect of “DNA marquee structures discount” and “DNA sound discount” respectively.  Those deductions, though described as “discounts”, were in fact deductions in respect of reductions in the requirement for the supply of tentage and for the supply of sound equipment by two firms known as “Complete Events” in respect of tentage and “Dobson Sound Productions” in respect of sound equipment.  These two firms were the largest suppliers to DNA in respect of the 2005 Event on the basis of their charges.  
13.	Also in the grand total shown on the proposal was a figure of £113,523.64 in respect of “DNA Productions event management fee @ 12.5%”.  That management charge of 12.5% was calculated on a figure of £908,189.15 shown in the proposal as “total cost including discounts”, namely the total cost less the two reductions in respect of tentage and sound equipment to which I have already referred.  On the copy before the court are hand-written comments in M’s handwriting, namely in respect of the 12.5%  figure the word “discuss” and, opposite the two figures for reduction of total cost and the sum of those amounts to be deducted, the word “discount”.  
14.	There then followed a series of meetings between M and his assistants and representatives of DNA in the course of which a series of revisions of the proposal were produced.  It is common ground that the alterations flowed from discussions in the course of which M indicated items which should be dropped or reduced, and/or alterations to the prices, for individual items resulting from pressure by M, accepted by DNA.  It is not in issue that these were very often obtained by M requesting a reduction for an individual item and MJ saying that he would revert to the supplier of that item and see if he could obtain a reduction in the price.  
15.	On 11th November 2005 Miss Smith sent to M an e-mail with attached to it “our revised budgets as discussed & the final quote from marquee company so that you can match their costs to the ones in our master budget”.  The e-mail contains six numbered paragraphs.  The first deals with a new layout for the cloakroom area, the second with a modification of the structure of the tent covering the main dining area and a consequent reduction in cost, the third with the addition to the cost of providing tentage of a sum of £13,039.68 being a 6% insurance fee in respect of the tentage being supplied on the night.  I will set out the final three numbered paragraphs in full as follows:-
“4. I also want to draw your attention to the notes column on line 48 referring to the dining marquee cost.  As previously agreed, there is a cost saving of £16,450 (inc vat) now that we are not having the video walls.  To clarify:
-	Original quote for dining marquee was £84,012.50 (inc vat)
-	Yesterday’s quote for dining marquee was £71,792.50 (inc vat) giving you a cost saving of “12,220.00
-	The additional £4,230.00 needed to bring the cost saving to £16,450.00 as previously agreed has been accounted for by removing line 288 from yesterday’s quote (False gable @ £4,230.00), bringing the total cost saving up to £16,450.00.
5. We previously showed the special discounts that DNA receives from the sound & marquee companies at the end of the spreadsheet.  To make things clearer, we have now included these over the individual items throughout the quote.
6. I have highlighted all cost changes in the spreadsheet for ease of reading through.”
16.	The revised proposal which accompanied this e-mail, in addition to columns showing cost and VAT, contained a column headed “notes” where DNA showed explanatory comments on some of the items, in particular where the reduction in respect of charges for tentage and sound equipment had been made, but also indicating some of the suppliers who were offering discounts or commissions to DNA in respect of their supplies.  I will refer to this document as “the marked up proposal”.  It was common ground at the hearing that there was a practice in this industry for suppliers to offer party organisers either a commission or a reduction in their normal prices as an incentive to those organisers to use their services.  It was MJ’s evidence that not all suppliers did so and that the amount of the discount or commission varied from supplier to supplier though in the large majority of cases they amounted to 10% of what would otherwise have been the price invoiced by the supplier to the organiser.  As already described, these commissions or discounts represented the total profit margin to MJ that he received for organising the 2001 Event.  By 2005 DNA had started to charge an events management fee as a percentage of total suppliers’ cost in addition.
17.	In the course of his evidence MJ accepted that it was DNA’s practice to conceal from its clients the fact that it was receiving these commissions or discounts from some of its suppliers in addition to an event management fee.  It was his evidence, confirmed in some of the documents before the court, that these commissions or discounts were included in the suppliers’ invoices to DNA, but not identified in those invoices, and were usually obtained after the events for which they were given, by DNA invoicing the suppliers for them.  MJ said that he did not regard suppliers’ offers of commissions or discounts as being contractually enforceable by DNA and that they were in the nature of ex gratia payments though in answer to my question he was unable to tell me of any occasion on which a supplier, having promised a discount or commission, later sought to avoid giving it.  It was MJ’s evidence that DNA’s practice was not to record offers of commissions or discounts from suppliers in writing, as far as possible, and that correspondence referring to such offers or their payment was routinely deleted from DNA’s books and records.  
18.	Shortly after the despatch by Miss Smith of the 11th November e-mail with the marked up proposal, it came to the notice of MJ that the notes to the proposal included reference to the offer of discounts by certain suppliers to the 2005 Event.  It appears that the result was an immediate attempt to recover, or obtain the deletion by M’s office, of the marked up proposal and the despatch of a replacement, excluding those references, attached to an e-mail of 14th November in which the new version is referred to as “the correct version of budget”.  It was M’s evidence that the marked up proposal was never brought to his attention at any material time before the 2005 Event took place.
19.	Discussions between the parties of the details of the 2005 Event continued and further revised proposals were produced by DNA for comment and criticism by M and his assistants until, on 18th November, M signed each page of the then revised proposal, which had been sent by MJ to Miss Harvey attached to an e-mail of that date, indicating his assent to the details set out in it and the various prices indicated in it.  On its last page the revised proposal, signed by M, showed a figure of £730,344.31 as the “total cost including all discounts” to which was added £91,293.04 “DNA Productions event management fee @ 12.5%” resulting in a “grand total” of £821,637.35.  It is common ground that in signing this revised proposal M did not assent to an event management fee of 12.5% as is illustrated by the fact that the signed last page shows the 12.5% figure circled accompanied by a question mark and 10% in M’s writing.  The words “total cost including all discounts” on the final page of this revised proposal had first appeared on the version sent under cover of the e-mail of 11th November, the marked up proposal, and all subsequent revisions.
20.	It is not in issue that, although there were subsequent further alterations to detail and prices, M’s signature of the revised proposal before him on 18th November created a contract between him and DNA for the supply and arrangement of the 2005 Event subject only to the parties agreeing whether the arrangement fee would be 10% or 12.5%.  It was on that date that DNA entered into contracts with the principal suppliers, in particular, Complete Events whose contract total amounted to £253,646.07.  
21.	On 23rd November 2005 DNA raised an invoice to M for an initial deposit of £190,234.55 towards the price of the 2005 Event which M paid.  
22.	In anticipation of a meeting with M on 30th November at which he hoped to negotiate the amount of DNA’s event management fee, MJ sent an e-mail to M and his wife dated 29th November as follows:-
“Regarding the DNA event management fee for the party, I just wanted to set out a few points for you to consider before we have a conversation to discuss this.
-	As you know, when I worked for you 4 years ago my fees were based on a commission of 10%.  At the time my company was really in its infancy and only really amounted to myself, working from home, with the help of some freelance staff.  So this sort of fee was satisfactory as overheads were low so it was mostly profit.
-	4 years later, DNA is now a company of 5 people with offices so our overheads are much higher.  Therefore our standard fees are now 15% which enables me – as a business now rather than an individual – to pay salaries over the 6 months or so we have worked on your event, office rents, etc and still make a profit.
-	As you are spending a lot on your party, I recognise 15% adds up to a significant amount, and given you are a good client and we are friends etc I am more than happy to take all these points into consideration and negotiate you a discount.  However I cannot really afford to go lower than 12.5% otherwise at 10%, once salaries and rents are covered, we will have made little profit which will defeat the purpose of working on the event for 6 months.  As a businessman I’m sure you will understand the logic.
-	Finally, if we were to work for only 10% again our fees would not have accounted for any sort of inflation over the 4 years since we last worked for you.  Unlike all the suppliers whose prices have increased in proportion over the last 4 years.
I hope you understand the points above in relation to the event management fee.”
23.	On 30th November the anticipated meeting took place attended by MJ, Miss Smith, and M and his assistants, including Miss Harvey.  In the course of the meeting, DNA’s event management fee was agreed at 12.5% and M agreed to pay the balance of a 75% deposit after certain deductions.  On the evening of 30th November MJ sent a fax to M and his wife attaching a further revision of the proposal after alterations agreed in the course of the meeting that day and an invoice for the balance of the deposit in the sum of £398,451.37 which M paid some days later.  The further revised proposal showed a figure of £735,787.62 as the “total cost including all discounts” with an additional £91,973.45 “DNA Productions event management fee @ 12.5%” making a “grand total” of £827,761.07.
24.	In the days following the 30th November meeting there were further small alterations to the “grand total” payable by M which it is not necessary to detail because no issue arises in relation to them.  The next material event was a fax dated 5th December 2005 from M to MS in the following terms:-
“Please confirm by signing a copy of this letter and returning the original this afternoon that under no circumstances DNA Productions or any of its officers directly or indirectly shall receive any commissions from any supplier who provides any goods and/or services, related to this party.
The only profit that DNA Productions or its officers will be making is the 12.5% which is the Event Management Fee as listed on the budget with the exception of Elton’s Band costs and that all listed items on the budget are all at cost to you.”
25.	MJ’s response to this fax was to telephone M and inform him that he was receiving discounts or commissions from his suppliers.  Following that conversation M sent to MJ a further fax as follows:-
“Following our telephone conversation this afternoon, you told me the reason you cannot sign the letter I sent this morning is because you do take commission from your suppliers in addition to your management fee of 12.5% (which comes to £91,973).
From our first meeting on 7th November 2005, when we discussed the budget I was always under the impression that the 12.5% fee was your profit on this party as it was the case at the last party in 2001 at 10%.
In order for me to consider a fair solution, I need to know accurately the amount of commission that you are anticipating from your suppliers.  Once I have this figure, then we can continue our discussions tomorrow morning before noon.”
26.	On the following day MJ telephoned M and as a result “agreed to receive no more than £16,000 in commission.”  (See paragraph 76 of MJ’s second witness statement).  This was followed by a further fax from M to MJ of 6th December as follows:-
“Please confirm by signing a copy of this letter and returning the original to us, that DNA Productions shall only receive commission from suppliers who provide goods and/or services, related to this party totalling no more than £16,000.
In addition to the above commission, DNA Productions will also be receiving from us 12.5%, which is the Event Management Fee as listed on the budget with the exception of Elton’s Band costs.”
27.	Later that day M sent to MJ a further fax with the same text but adding appropriate VAT which MJ signed.  On the same day a Mr Murray Leach, MJ’s recently dismissed personal assistant, telephoned M’s office and spoke to Miss Harvey.  She prepared a minute of that conversation dated 6th December as follows:-
-	“JJ worked for Matt James at DNA Productions until the end of yesterday.
-	He left DNA because he did not agree with the way Matt worked.
-	JJ informed me that Matt had been asking suppliers to mark up their quotes by 10% for the goods and services for RM’s Christening Party.
-	He advised us to check our Budget amounts carefully to look for inconsistencies/query anything we suspect.
-	He also informed me that Matt had lost business to Sir Elton John (the Wedding).
-	He left his telephone number in case we wish to discuss anything further:”
28.	The 2005 Event took place on the evening of 10th December 2005.  It seems to be common ground that this passed off smoothly and successfully. 
29.	Following the 2005 Event and beginning on 13th December 2005, M sent to MJ at DNA a series of faxes raising a large number of complaints in relation to various of the aspects of the event arranged and supplied by DNA upon which he requested a deduction in DNA’s charges in their final bill submitted to him on 18th January 2006 in the form of a final revised proposal which included all the alterations made by agreement up to 10th December.  In the result, after protracted correspondence, DNA’s charges were reduced by £9,435.76 and a further credit was given of £5,875.79 in respect of matters occurring after 10th December.  
30.	The question of whether DNA had been receiving commissions or discounts from its suppliers which had not been disclosed to M was first raised in the course of this correspondence by M in a letter of 23rd March 2006 where, in the final paragraphs, he says this:-
“Last but not least and certainly most important, you said during one of our meetings that you would make all original invoices available for our inspection.  I would like to do so and I have no objection to this being done in the presence of someone from DNA.  However, please bear in mind that this inspection is not something that can be done in a day.  One thing that may expedite the process is if you put the invoices in the same numerical order as they appear in the Budget.
I must also inform you that we shall be writing to all vendors for their confirmation of the commissions you have received from them, as I harbour suspicions that you have received more than £16,000 + VAT in total.  As I see it, you have the following choices:
- If you have not received more than £16,000 + VAT in commission, you should not have a problem in providing the backup bills.
- If you have received more than £16,000 + VAT this is your last chance to own up to this.
- You may start legal proceedings against me at the following address, during which time all of the above will become apparent.”
31.	DNA’s response to this was contained in a letter from MJ to M of 18th April 2006 in a paragraph headed “invoices” which reads:-
“You have requested for copies of DNA’s invoices from its suppliers. You will recall that you contracted with DNA Productions (Europe) Limited to create and host the party held on 10th December 2005.  The party which was prepared for you was a package created exclusively by DNA Productions (Europe) Limited.  As DNA required goods and services in order to hold the event for you, we entered into a separate contracts [sic] with each of our suppliers.  As such, I do not see that providing copies of the invoices from our suppliers has any bearing on our contract with you.  The rates agreed between us and our suppliers are entirely separate from our agreement with you and therefore, there is no duty for DNA to provide these to you.
I note your intention to write to all of my suppliers in respect of the commission my company may or may not have received from them but again, our contractual relationship with these suppliers is completely separate to any agreement with you.  I would therefore be grateful if you could refrain from contacting our suppliers.  If you have any further queries, I ask that you address them directly to DNA.”
32.	M responded through his solicitors by letter dated 23rd May 2006, the material passage in which is as follows:-
“3. It was an express term of your engagement in relation to this function contained in and/or evidenced by the letter dated 6 December 2005 signed by Mr James by way of confirmation and acceptance and by way of express representation and/or warranty, that your fee in relation to the function would be limited to and no more than 12.5% of the actual cost of the event plus a maximum of £16,000 exclusive of VAT negotiated by you with suppliers by way of referral fees, commissions or other arrangements.  It was a further express term of the engagement agreed between you and Mr Manoukian and contained in and/or evidenced by the same letter that all supplier’s charges presented by you to our client for payment would be at cost.
4. Further, it was also an express term of your engagement that you would on request provide supporting invoices, vouchers and other documents for the amounts included in your final invoice.  You expressly offered and agreed and promised to do so on request in a conversation with Mr Manoukian at a meeting in November 2005.
5. Further, in agreeing prices with suppliers you acted as agent owing fiduciary duties in particular a duty to negotiate and agree in good faith and in your client’s best interests the prices charged by suppliers and thus the expense incurred in relation to the function.
6. Mr Manoukian has already indicated his concern that, contrary to your express agreement, you have made arrangements with suppliers resulting in payment and/or credit and/or benefit to you of more than the £16,000 permitted by your agreement.
7. You have refused to comply with Mr Manoukian’s request that you present the supporting invoices and vouchers for his inspection and discussion to verify the position (in breach of the term referred to at 3 above) or to give any account of the benefits obtained from and/or negotiated with suppliers so as to seek to satisfy him that such benefits are within the agreed £16,000 limit.
8. Although disappointed that you have entered into an express commitment in relation to supplier commissions and are unable and unwilling to demonstrate compliance with it rather than provide an open and frank account of the arrangements made, Mr Manoukian does not take issue with your making such arrangements in themselves.  They should, however, not be concealed.  The central point is that insofar as you have negotiated benefits of greater than £16,000 from suppliers in breach of your agreement not to do so, your final invoice must be reduced accordingly by that excess over £16,000.  Please provide a full account of all such arrangements and dealings with suppliers including copies of any documents evidencing such discussions and negotiations.
9. Further, Mr Manoukian is concerned that you did not agree the most favourable prices from suppliers but instead invited suppliers to charge more than they originally quoted or intended or would have been prepared to agree.  Such behaviour in breach of duty of course has the effect not only of significantly increasing the amount payable in respect of the function but in particular inflates your fee, based as it is on 12.5% of the cost of the function.  As well as the supplier invoices and supporting vouchers, our client requires to inspect all documents in whatever form relating to your negotiations with suppliers, including without limitation all quotations and discussions as to the price to be charged for the goods and/or services of each supplier.”
33.	The quoted passages from these three letters define the main issue between the parties.  It is DNA’s contention that it supplied and managed the constituents of the 2005 Event pursuant to an all-in contract with M by which he agreed to pay an all-in price for the goods and services set out in the final revised version of DNA’s proposal.  It follows, as DNA contends, that it is immaterial whether, in supplying those goods and services, DNA obtained them from its suppliers subject to discount or commission arrangements with those suppliers.  Each item of cost appearing in the proposals was an offer to supply that item by DNA at a price which M ultimately accepted.  
34.	It is M’s case that DNA contracted to supply and manage the 2005 Event on the basis of a “cost plus” contract under which DNA would obtain from its suppliers and subcontractors the best price for their services obtainable, to which DNA would add an arrangement fee of 12.5%, which fee would comprise DNA’s reward for its arrangement services and profit margin.

35.	These proceedings were commenced on 6th December 2006.
36.	In addition to MJ, Miss Smith, MJ’s assistant, gave evidence for DNA and was cross-examined.
37.	Under cross-examination Miss Smith accepted that M would not have known that DNA was receiving discounts or commissions from its suppliers for the 2005 Event.  She accepted that it was DNA’s policy to conceal from its customers and, in particular, M, that DNA was receiving these benefits and that suppliers were asked to add back any discounts and to add any commissions to their invoices before submitting them to DNA.  This was done for the purpose of the 2005 Event because it was known that M would probably ask to see suppliers’ invoices supporting the items appearing in DNA’s proposals.  Suppliers were asked to prepare their invoices in this way so that M would not be aware that DNA was receiving discounts and commissions from suppliers because Miss Smith accepted that he would have objected.  M would have objected because he would have regarded the consequent profit that DNA was receiving as excessive and would have thought that, in consequence, he was being overcharged.  
38.	The transcript shows the following passage in the course of Miss Smith’s examination:-
“Q  Did he tell you to obtain these quotes so that if Mr Manoukian had asked to see the quotes supporting the figures in the budget then he would be able to show them to Mr Manoukian?
A  Yes.  I was asked to get quotes from suppliers that included the 10% or whatever percentage, and I did understand that to be that we may have to show them.
Q  That Mr Manoukian might want to see …
A  He might want to see them yes.
Q  …The quotes that were supporting the items in the budget?
A  Yes.
Q  The quotes that you supplied, and we have seen some of the quotes that you obtained, would include but not show the discount to DNA? 
A  Yes.
Q  So far as you were aware, Mr James was prepared to show those documents to Mr Manoukian?
A  Yes, he would have been.  Yes.”
39.	Miss Smith was then questioned about her having mistakenly sent to M a revised proposal showing, in a column headed “notes”, entries which demonstrated that DNA was receiving discounts or commissions.  She was asked why she did this and her response was that it was necessary for her to do so to keep a record of those benefits so that DNA would be able to obtain them from the suppliers.  She said that she ceased to record them in this way following the internal controversy which resulted in her seeking to recover from M’s office the marked up proposal and the substitution of a proposal omitting the notes.  
40.	Miss Smith was asked whether she recorded the discounts and commissions thereafter in a different way and she agreed that she did.  She said that she recorded them on her computer from which there would probably have been printed in hard copy an account, for DNA’s internal purposes, of those benefits.  No such document had been produced in disclosure.  Miss Smith was no longer employed by DNA but those appearing for DNA undertook that a search would be made for her computer and it would be made available to the Defendant’s solicitors for imaging.  This took place after the close of evidence but before the delivery of written closing submissions.  In the result two computers were handed over by DNA for imaging with the result that, between the conclusion of the evidence and closing submissions, extensive further disclosure of documents was made by DNA.
41.	This further disclosure showed correspondence between DNA and its suppliers for the 2005 Event in which the suppliers were being asked to increase their invoices to DNA so as to write back the discounts they were prepared to make or to adjust their charges so as to cover the commissions they were prepared to pay to DNA.  An example of such a request is an e-mail from Miss Smith to a Mr Steve Kearney, the representative of a supplier, dated 25th November 2005 asking him to quote for the provision of services for the 2005 Event which she concludes by saying:-
“When you do quote, could you also just include 10% commission to us hidden in the quote?  We have to show the client all our invoices which is why we need the written quote and also the commission included.”
42.	Also disclosed was the document recording the total commissions and discounts which DNA was expecting to receive or had received from its suppliers in its preparations for the 2005 Event of which Miss Smith had spoken in the course of her cross-examination.  Discounting the figure shown in respect of the supplier “Sound Advice” which, it was accepted, should not have been included in the total, the total for commissions and discounts shown by this document was £59,816.05.  
43.	This fresh disclosure also shows what appears to be double charging.  It includes an e-mail of 10th November 2005 from Miss Smith to Complete Events in which she says:-
“As discussed, attached is a breakdown of how I need your quote laid out in order to show Manoukian – so we can then get deposit [sic] from him!  Where the costs are higher, it’s because we’ve marked them up – your quote should still show these as I have quoted to Manoukian but allowing for a bit more commission for DNA.  Does than make sense?!
Also you will notice the generator’s cost is a bit lower than your cost in last quote – but I’ve added the difference into power distribution – I know it seems odd but it’s just the way it was in our quote to Manoukian so can you just amend to match my figures?!
Figures not in red are things which need to be added back into your quote that weren’t in last one.
Figures in blue are items that you’ve included elsewhere in your quote – but because we left them as individual items in Manoukian’s quote, we need to leave them that way – i.e. another extra commission to DNA!”
The accompanying breakdown shows two figures in blue of £200 and £2,400.  
44.	The new disclosure shows what appears to be DNA encouraging a supplier to add to its invoice to DNA, in respect of the 2005 Event, charges in respect of an entirely different event not involving M which Miss Smith regarded as irrecoverable because the funding for that other event had run out.  Thus in an e-mail from Miss Smith to a Mr O’Shaughnessy, the representative of a supplier, she says:-
“Please can you quote separately for Manoukian for 25 x 6 ft square tables and 25 x mirrored tops – as discussed we may offset some of Red Cross’ cost on to Manoukian to help with the budgeting!  Will speak to you about this tomorrow so this does not need to be quoted today.  Please can we also have a cost for 3 x mirrored chandeliers for Manoukian – as above may also offset some cost from Red Cross – but again can discuss this tomorrow with you.  Finally, re 10% - please add in all costs in your quote.”
The law
45.	I have already set out the rival contentions as to the contractual terms upon which DNA provided its services to M for the purposes of the 2005 Event.  M has an alternative defence to DNA’s claim should the court be persuaded that M entered into an “all-in contract” for the supply of DNA’s services, namely, that he was induced to do so by the misrepresentation of DNA and has suffered loss as a result of having done so for which he can recover damages under Section 2(1) of the Misrepresentation Act 1967.  
46.	I will deal first with the issue of the terms of any contract, it being the common intention that DNA supply its services to M pursuant to a contract.  
47.	In his concluding submissions for M, Mr Chapman cited a passage from a textbook, Cartwright, on Misrepresentation, Mistake and Non-Disclosure, 2nd edition (2007) para. 13.19 as follows:-
“(1) The first question is whether the parties were in fact (subjectively) in agreement on the existence and terms of the Contract.  If they were, that should be determinative.
(2)  If the parties were not, in fact, in agreement, then – in the case where the claimant is seeking to rely on there being a contract on terms [x], and the defendant is either denying that there is a contract at all, or is asserting that there is a contract on terms [y] – the question becomes whether the claimant can in law hold the defendant to have agreed to a contract on terms [x].  He may do so if:
(a)  the defendant’s words, conduct or (exceptionally) silence would have led a reasonable person in the claimant’s position to believe that the defendant was agreeing to [x]; and
(b)  the claimant in fact believed that the defendant was agreeing to [x].
    (3)  If the claimant succeeds in showing that he can hold the defendant to a contract on terms [x] in accordance with proposition 2, he has established a contract on terms [x] unless the defendant can rebut this by showing that the claimant’s conduct, words or (exceptionally) silence would have led a reasonable person in his position to believe that the claimant was agreeing to [y].  In such a case, there is no contract.”
48.	I do not understand Mr Fadipe for DNA, to be challenging this summary of the relevant law of contract.  
Conclusion on the facts 
49.	I have come to the clear conclusion that, at all material times, M believed that he had accepted DNA’s offer to supply and arrange the 2005 Event upon a “cost plus” contract under which DNA was to be paid an overall price calculated as the sum of the charges to DNA of all the suppliers of goods and services for the purposes of the 2005 Event, being the best prices obtainable by DNA together with an arrangement fee of 12.5% of such amount, being DNA’s commission for finding and negotiating the prices of the suppliers, remuneration for DNA’s services as designers, arrangers, and supervisors of the event and their profit margin.  I have arrived at this conclusion for the following reasons:-
i)	It is common ground that, unlike the 2001 Event, there does not seem to have been any occasion or any document, at which or by which DNA and M sought to define the terms upon which DNA was to provide its services to M for the 2005 Event.  It seems to have been assumed, at least by M, that the arrangements would be similar to those under which the 2001 Event took place, save that M would not be contracting directly with suppliers, with DNA acting as his agent to nominate suppliers and obtain prices from them.  DNA would contract with M to provide the event itself contracting with suppliers to enable it to do so.
ii)	The line by line negotiation, see paragraph 14 above, of what DNA was to provide, and at what price, was conducted by DNA in a manner so as to represent to M that what he was being offered, in respect of each item on the various proposals put before him, was the price at which DNA was obtaining the relevant supply or service from its suppliers.  An example of this, in correspondence, is an e-mail from Angela Harvey, M’s personal assistant, to MJ of 14th October 2005 as follows:-
“At the last Christening party the costs for services (kitchen & toilets) came to £13,540.
RM thinks that £7,200 + insurance and VAT seems a bit high – can you get a better price?  If not can you provide a breakdown to show how they arrive at this figure?”
iii)	That DNA was to be paid an event management fee calculated as 12.5% of the sum of the suppliers’ invoices to DNA, without any indication, oral or in writing, that DNA was to receive some other benefit under the contract, carried the clear implication that that event management fee represented the entirety of DNA’s remuneration for its services and its profit margin.  That M was entitled to assume that this was so is all the clearer in the light of the arrangements for the 2001 Event where MJ’s remuneration and profit margin was calculated as 10% of the sum of the suppliers’ contracts to that event and, as his evidence was, no more.
iv)	The representations made by MJ in the e-mail of 29th November 2005, the material text of which I have set out above, and are part of the parties’ negotiations as to the amount of the event management fee, are quite inconsistent with an “all-in” contract but entirely consistent with a “cost plus” contract.  
v)	The concluding words of the final proposal which followed the meeting of 30th November showing the sum upon which the event management fee was to be calculated as being the “total cost including all discounts”.  Mr Fadipe for DNA submitted that “including all discounts” referred to the reductions in respect of tentage and sound equipment agreed after the first proposal had been submitted and which were incorporated by allocation to individual items of tentage and sound equipment appearing in the marked up proposal. I am not persuaded by this submission.  It seems to me that M was entitled to take notice of the difference between the words “total cost including discounts” in the first proposal, where the two discounts were separately identified, and the words “total cost including all discounts”, emphasis added, that appeared in the marked up proposal and all subsequent revisions of that proposal in which those reductions, referred to as “discounts”, were shown as detailed price reductions scattered through the proposal.  
vi)	The unchallenged evidence of Miss Harvey, in particular at paragraph 7 of her witness statement as follows:-
“7.  Our office diary shows that Mr Manoukian met Mr James of DNA at 44 Sloane Street to discuss the party on 7, 10 and 30 November.  I attended all those meetings.  Many practical matters were discussed but I know that at all times when Mr Manoukian and Mr James were discussing the cost of the party and DNA’s fee, that DNA’s fee was to be based on a percentage of cost.  12.5% was agreed.  I know because I was present at the discussions that Mr James and DNA appreciated that when Mr Manoukian agreed that the cost of the party would be met plus a fee of 12.5% for DNA, he meant the actual cost of the goods and services to be procured on his behalf by DNA.  Mr Manoukian was not agreeing that DNA could “mark-up” its suppliers’ charges when re-invoicing to its client.  This was never discussed.  Mr Manoukian trusted Mr James and DNA to obtain the necessary goods and services at acceptable cost and that cost would then be paid.  There was frequent discussion about the cost of items and the context of all of those discussions was that the client was paying the actual cost to DNA.  It was my understanding that DNA made its money from its work on the party from its 12.5% fee.  This was also clear to me from the email sent from Mr James to Mr Manoukian on 29 November 2005 – subject “DNA Event Management Fee” which is attached to this statement at page 4 and in which Mr James explains that he had to increase his management fee to pay increased overheads and that at 10% there would be very little or no profit.”
I have also come to the clear conclusion that DNA, through MJ, intended to provide its services under an “all-in” contract but, at all material times, was well aware that M thought that DNA’s services were being provided under a “cost plus” contract.  I have arrived at this conclusion for the following reasons:-
1.	MJ knew that M had refused an “all-in” contract for the purposes of the 2001 Event and there was no evidence that he had changed his mind by 2005, or of any attempt on behalf of DNA to persuade him to do so in the course of the negotiations leading up to the contract for the 2005 Event.  
2.	The campaign of concealment from M by DNA, of the fact that they were receiving discounts from their suppliers, evidenced by the documents produced in the course of late disclosure, are only consistent with DNA being aware of M’s misapprehension as to the terms upon which DNA had at all material times intended to make its services available, and that it was likely that those terms would be unacceptable to him.  It is true that there was partial disclosure by MJ to M of the discounts, which DNA was receiving from its suppliers, on 5th December, five days before the event was to take place, at a time when it would have been impossible for M to make different arrangements.  MJ disclosed suppliers’ discounts of £16,000 whereas, after the late disclosure, it is demonstrated that DNA was expecting to receive discounts or commissions of at least £58,000. 
Conclusion
50.	Applying the accepted legal principles contained in the quotation from Cartwright, which I have set out above, to these factual conclusions, the result must be that there was no contract agreed between DNA and M governing the supply of DNA’s services at the 2005 Event.  Since the burden of proof plainly rests on the Claimant, DNA, to establish the contract under which its claim is made, that claim must fail.  No alternative claim to recover any additional sums over and above those already paid by M to DNA, on the basis of quantum meruit, was pleaded or evidence called to support such a claim, although it seems to be probable that M would have paid the amount of the suppliers’ invoices to DNA less all discounts with a 12.5% event management fee calculated as a percentage of that sum.  It is unlikely that M will now accept that DNA has even now made full disclosure of the discounts or commissions that it received for the 2005 Event.  There was some evidence that some suppliers were giving DNA what amounted to discounts indirectly by benefits conferred pursuant to other transactions.
51.	This conclusion makes it unnecessary for me to consider M’s defence based on the Misrepresentation Act and I do not do so.  In any event I have considerable doubt that that defence would have assisted M in the absence of any evidence of damage flowing from his having been persuaded to enter into an all-in contract with DNA on the terms alleged by DNA.  As the evidence stands, there does not seem to me to be any other basis upon which a cross-claim to recover money can be made.  
52.	M counterclaimed in the main proceedings for an order that DNA deliver to him the master tapes and assign to him the copyright of the film which DNA had arranged a supplier to make of the 2005 Event.  This counterclaim was not pressed because it was clear that DNA had only contracted to provide an edited film of the event and that that edited film had been made and delivered to M.  
53.	I will hear Counsel on the order which follows from this judgment.