LM-2024-000238 - [2025] EWHC 1441 (Comm)

Jefferies’ pleaded case as to incorporation in the particulars of claim is as follows, with the proposed amendments shown underlined:

“4.

The relationship between the parties is governed by the Claimant’s Terms of Business (the ‘TOBs’) as sent and/or notified to the Defendant from time to time. On 2 January 2018, for example, the Claimant provided the Defendant with a copy of its TOBs and made it expressly clear that the relationship between the Claimant and the Defendant was governed by the TOBs. Further, on 3 May 2019 and 23 September 2020 respectively, the Claimant provided the Defendant with a copy of its TOBs dated July 2018 and a copy of its TOBs dated November 2019 (the ‘July 2018 TOBs’ and the ‘November 2019 TOBS’ respectively).

…

8.

Further, clause 23.6 of the July 2018 TOBs and the November 2019 TOBs provides as follows:

‘We may make changes to our Terms, policies and other documentation referred to in these Terms from time to time. We will notify you of any changes to our Terms, Order Execution Policy and execution arrangements, Conflicts Policy, Complaints Policy, Costs and Charges Information Document and any policy or document or Schedule referred to in these Terms by posting updated versions of the applicable documents on www.jefferies.com and, where there is a material change, by giving you written notice. Any such change will become effective when the updated document is posted on our website or, in respect of material changes, on a date to be specified in the notice which will be at least ten (10) Business Days after the notice is sent to you unless (i) it is impractical to do so or (ii) otherwise required by Applicable Law.’

9.

The TOBs were amended from time to time, and it is averred that such amendments are binding and effective pursuant to clause 23.6 (above). As at the date of the Trade, which was entered on 16 March 2023, the TOBs were last amended in July 2021, (the ‘the July 2021 TOBs’) and are applicable to the Trade. Alternatively, if (which is denied) the said amendments are not binding on the Defendants for any reason, then it is averred that the November 2019 TOBs or the July 2018 TOBs, or another version of the TOBs sent and/or notified to Ashenden on an earlier date, apply to the Trade. In any event there is no material difference between the July 2018 TOBs, the November 2019 TOBs or any other version of the TOBs sent and/or notified to Ashenden and the July 2021 TOBs for the purposes of these proceedings. For brevity, the remainder of these Particulars of Claim will refer to the TOBs without distinguishing between the July 2018 TOBs and the subsequent or any other versions thereof.”

Mr Bushell’s evidence is to the following effect.

As regards the facts, I consider that the issues between the parties are of no great significance for present purposes. Mr Sigler states that Ashenden has no record of receiving the letter of 20 March 2015, and he observes that Jefferies has produced only the pro forma version of the letter but not any version showing Ashenden’s address or any evidence beyond assertion that the letter was sent to Ashenden. (He provides evidence that the CASS Consent Form returned by Ashenden on 30 April 2015 had been sent to it separately by email.) Mr Sigler also refers to the communications on 2 January 2018 and 3 May 2019 as “unsolicited”—a characterisation that is disputed by Jefferies. The main points made by Mr Sigler are, in my view, simply the following:

Mr Mukherjee’s submissions on behalf of Ashenden can be summarised very briefly, but not I think unfairly, as follows. There are only three ways in which a party’s standard terms of business can be incorporated into a contract: first, by express agreement; second, by incorporation by reference within a contractual document; third, by a course of dealing (skeleton argument, para 19). In this case, there was no express agreement. No contractual documents referred to the Terms of Business; the Terms of Business were merely provided by communications that were not contractual. And Jefferies does not rely on a course of dealing. Therefore, the offer and acceptance in respect of the Trade were simply on “the default rules of contract”.

Mr Phipps’s submissions on behalf of Jefferies were to the following effect. Jefferies had repeatedly and expressly brought the Terms of Business to Ashenden’s attention. They were, by their very nature, intended to be contractual; and Jefferies made clear in its communications that they were to govern the relationship thereafter. The absence of mention of the Terms of Business in the trade confirmation or any “contractual document” is irrelevant, because by the time of the Trade they had already been agreed and were by way of a “master agreement”.

In my judgment, Jefferies has a good arguable case that the Terms of Business were incorporated into the Trade. That is the extent of the decision I am called on to make; I add, though, that I am of the opinion that the Terms of Business were plainly incorporated. Counsel referred me to a good many cases on incorporation, most of which are very well known and which tend to focus on questions that do not arise in this case (such as whether Party A had done enough to bring the terms to Party B’s attention, or whether the terms were drawn to Party B’s reasonable notice only after the contract was concluded). I do not think it necessary to refer to all of these cases. It will suffice to mention two of those on which Mr Mukherjee relied.

Mr Mukherjee placed particular reliance on the decision of the Court of Appeal in Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Lloyd’s Rep. 427 (“Medeast”). The plaintiff contended that liability on the defendant’s counterclaim was excluded by a provision in certain standard terms. Reversing the decision at first instance, the Court of Appeal held that the standard terms had been incorporated into the relevant contract: there had been a course of dealing between these commercial companies, in which at least 11 invoices had been sent by the plaintiff, giving notice that business was conducted on the standard terms; this was sufficient notice to incorporate the terms into the relevant contract, although as a matter of fact the defendant had not read the notice and had never asked for a copy of the terms. As I understand it, the primary reason why Mr Mukherjee relied on the case was that it was said to support the conclusion that, unless standard terms were expressly agreed or incorporated by reference in a contractual document, they could only be incorporated by a prior course of dealing.

I do not think that either Medeast or sound principle avails Ashenden. It is instructive to see why the Court of Appeal in Medeast thought that the judge at first instance had reached the wrong conclusion. The judge had adopted the test stated by Ackner LJ in Keeton Sons & Co. v Carl Prior Ltd (14 March 1985, unreported):

“The question in a case of this kind must always be, ‘has reasonable notice of the terms been given?’ This is essentially a question of fact depending on the circumstances of the case, and in particular on the nature of the business and position of the parties to the transaction.”

The Court of Appeal in Medeast accepted this test but did not agree with the judge’s application of it to the facts. At p. 430 Taylor LJ identified two propositions that were inherent in the way the judge had applied the test: “First, that the specific condition relied upon must be drawn in terms to the customer’s attention, and a reference to the conditions generally with the offer of a copy of them on request will not suffice. Secondly, that notice of the condition must be in a contractual document.” After reviewing several authorities, Taylor LJ continued at p. 433:

“The effect of those authorities is to show in my judgment that the two propositions which guided the learned Judge in his approach to the first issue in this case were incorrect. He was right to apply the test laid down by Lord Justice Ackner. But whether one applies Lord Justice Ackner’s simple test, or that stated by Mr. Justice Donaldson and applied by Mr. Justice Staughton, it is not necessary to the incorporation of trading terms into a contract that they should be specifically set out provided that they are conditions in common form or usual terms in the relevant business. It is sufficient if adequate notice is given identifying and relying upon the conditions and they are available on request. Other considerations apply if the conditions or any of them are particularly onerous or unusual.

Again, it is not necessary that notice of the conditions should be contained in a contractual document where there has been a course of dealing.

Here, the parties were commercial companies. There had been a course of dealing in which at least 11 invoices had been sent giving notice that business was conducted on the IFF terms at a place on the document where it was plain to be seen. Mr Zacaria knew that some terms applied. He knew that forwarding agents might impose terms which would frequently be standard terms and would sometimes or frequently deal with risk. He never sought to ask for or about the terms of business. The IFF conditions are not particularly onerous or unusual and, indeed, are in common use. In these circumstances, despite Mr Gompertz’s clear and succinct argument to the contrary, I consider that reasonable notice of the terms was given by the plaintiffs. Putting it another way, I consider that the defendants’ conduct in continuing the course of business after at least 11 notices of the terms and omitting to request a sight of them would have led and did lead the plaintiffs reasonably to believe the defendants accepted j their terms. In those circumstances it is irrelevant that in fact Mr. Zacaria did not read the notices.”

The reference to Donaldson J’s test is to S.l.A.T. di del Ferro v Tradax Overseas S.A. [1978] 2 Lloyd’s Rep. 470, where he said at p. 490 (my emphasis):

“Lord Justice Diplock, (as he then was) pointed out in the HardwickGame case, [1966] 1 Lloyd’s Rep. 197; [1966] 1 W.L.R. 287, at pp. 241 and 339D, that the test to be applied is not what the parties actually thought were their rights and liabilities, but what each by his words and conduct led the other party to believe were the liabilities which he was accepting and the concomitant rights which he was granting. In this context I do not think that Lord Justice Diplock was referring to the other party actually believing anything. He meant that the words and conduct of Party A had to be considered with a view to what Party B, as a reasonable man, could and would, if he had applied his mind to the point, have been led to believe.”

(See also per Bingham and O’Connor LJJ at p. 435.)

The difficulty with Ashenden’s position (or, perhaps, the reason for any purely specious attraction it might possess) is that it fails properly to engage with the simple, and essentially factual, question posed by Ackner LJ in Keeton Sons & Co. v Carl Prior Ltd or Donaldson J in S.l.A.T. di del Ferro v Tradax Overseas S.A. In the formulation of the latter, the question is simply: what did each party by its words and conduct lead the other party to believe were the liabilities which it was accepting and the concomitant rights which it was granting? It is in this context that the “course of conduct” point in Medeast, on which Mr Mukherjee placed much weight, has to be seen. On the facts of that case, there was actually no contract in which the terms had been expressly incorporated or even referred to at the point of contracting: the course of conduct was not a matter of there being many such occasions of express reference when the contract was made, followed by an instance when the express reference was omitted. Rather, as appears from p. 429, each contract was made orally and without mention of the terms. However, on each occasion the plaintiff followed up the contract with a (necessarily non-contractual) invoice, which did refer to the terms. Accordingly, when the contract in question was made, the defendant (whatever the subjective state of mind of its director) had fair and reasonable notice that the plaintiff was intending to contract on the standard terms; and, by making the oral contract, it was by its conduct leading the plaintiff to believe that it was contracting on those terms, even though nothing was said about the terms.

If one attends to the facts of the present case, it is obvious that Jefferies made it clear, time after time, that its Terms of Business would govern any contracts it entered into. The fact that no mention of those Terms of Business was made by either party when the individual contracts were made does not matter. So far as appears from the evidence, Ashenden never gave an indication that it did not agree that the Terms of Business should apply. The question, then, simply becomes whether by contracting in those circumstances Ashenden was leading Jefferies to believe that it was contracting on the Terms that Jefferies had stipulated. The obvious answer is that it was.

Mr Mukherjee gave three answers to this, none of them persuasive. The first answer was that the conclusion could hold only if there were a prior course of dealing, which is not the case here. With respect, that is to use a formula to evade the facts. Jefferies and Ashenden had transacted business with each other many more times than had the parties in Medeast. The fact that the standard terms in that case had been referred to in the invoices, whereas here the Terms of Business were not mentioned in the trade confirmations, is nothing to the point. Indeed, the present case could even be considered a fortiori:in Medeast the standard terms were apparently mentioned only ever after contracts were made; here, they were mentioned in advance of the making of individual trades.

Mr Mukherjee’s second answer was by reference to the judgment of Edwards-Stuart J in Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC). That was a “battle of the forms” case. The judge held that neither party’s standard terms had been incorporated into the contract. He considered several authorities, including Medeast, and then turned to apply the principles to each party’s standard terms in turn. When discussing the defendant’s terms, he said:

“49.

In the light of the authorities that I have discussed, it seems to me that a seller who wishes to incorporate his terms and conditions by referring to them in his acknowledgement of order - thus making it a counter offer - must, at the very least, refer to those conditions on the face of the acknowledgement of order in terms that make it plain that they are to govern the contract. Having done that, if the conditions are not in a form that is in common use in the relevant industry, the seller must give the buyer reasonable notice of the conditions by printing them on the reverse of the acknowledgement of order accompanied by a statement on the face of the acknowledgement of order that it is subject to the conditions on the back.

50.

An alternative way in which the same end may be achieved (if the terms and conditions are not printed on the back of the order) is for the seller to send the buyer a copy of his terms and conditions, making it clear that they are the only terms and conditions upon which the seller is prepared to do business.”

Mr Mukherjee said that in the present case Jefferies had not expressly stated that its Terms of Business were the only terms on which it was prepared to do business. There is nothing in that point. First, Jefferies had made it plain that its Terms of Business were to govern all contracts for Services. Edwards-Stuart J’s judgment is not to be read as though it were a statute prescribing a form of words. Second, paragraph 50 in Edwards-Stuart J’s judgment was in the context of a battle of the forms, where the question is whether the offeree (the seller) has done enough to make clear that it was making a counter-offer. This is not the case here.

Mr Mukherjee’s third answer was to submit, boldly, that the simple analysis in the present case was that Ashenden made an offer that referred to no specific terms (other than subject matter and price) and was therefore governed by what he called “the default rules” of contract, and that Jefferies accepted that offer without more. The trouble with that analysis is that it abstracts the offer from its context. The relevant context is that Jefferies had made it plain that any business it did would be on the Terms of Business and that Ashenden had never demurred. We thus revert to the question of fact posed by Donaldson J (or, in alternative formulation, by Ackner LJ); to which, in my judgment, there is a clear answer.

I mention, finally, that I see no need to rely, for present purposes, on the express mention of Terms of Business in the CASS Consent Form signed and returned by Ashenden on 30 April 2015. The document appears on its face to be strongly adverse to Ashenden on the Incorporation Issue. Mr Mukherjee submitted that, to the contrary, the document indicated agreement not to the Terms of Business but only to Jefferies’ terms relating to the holding of assets. Even if that rather difficult submission be correct, it does not improve the weakness of Ashenden’s position overall.

Therefore, I agree in substance with Mr Phipps’ submissions. Among the cases he cited I mention, as being generally helpful, Parker v The South Eastern Railway Company (1877) 2 CPD 416, per Mellish LJ at 8-9, and Hood v Anchor Line (Henderson Brothers) Ltd [1918] AC 837, per Viscount Haldane at 26 and 27. For my part, I do not think that a reference to a “master agreement” adds anything to the analysis. The Terms of Business were never signed. Therefore their contractual status rests on the reasonable construal of the parties’ conduct from time to time. To infer from their conduct a “master agreement” is no different from inferring that every time they did a trade they did so on the Terms of Business. I think that one should not get too hung up on labels.

Accordingly, I hold that Jefferies has a good arguable case on the Incorporation Issue. Indeed, in my view it is correct on that issue.