Case Nos: IP-2023-000039 and IP-2023-000132 - [2024] EWHC 2889 (IPEC)

Currentbody is not a party to the NDA and therefore has no direct cause of action against ISM or ISD for alleged breach. In its counterclaim Currentbody relies on s.1 of the Contracts (Rights of Third Parties) Act 1999. That section provides, so far as is relevant:

Currentbody’s counterclaim states that the purpose of clause 2.5 is to benefit Kaiyan’s distributors by allowing them to market the products without risk of a claim from the I-Smart Companies, and that the NDA therefore purports to grant a benefit to Currentbody as a member of the class of distributors.

In the present application ISD contended that s.1 cannot assist Currentbody. There is no express provision that Currentbody may enforce any term of the NDA, nor does any term purport to confer any benefit on Currentbody. Currentbody is neither expressly identified in the NDA by name, as a member of a class or as answering a particular description.

Currentbody responded by saying that ISD is in breach of CPR 24.5(1)(b) and 24.5(3)(b): ISD has raised an argument under s.1(3) of the Contracts (Rights of Third Parties) Act 1999. This was neither mentioned or alluded to in ISD’s application notice. It was first raised in ISD’s evidence one clear day before the hearing. Currentbody said that had the point been signalled in good time, ISD would have had the opportunity to research and present case law on s.1, in particular s.1(3). As it is, this first argument should be disregarded.

The importance of the procedural safeguards underlined by the Court of Appeal in Price v Flitcraft can only have been enhanced by the subsequent transfer from a practice direction to the rule itself. The relevance of the Contracts (Rights of Third Parties) Act 1999 did not of course come as a surprise to Currentbody. However, s.1(3), its scope and effect in law was not in play until the present application.

ISD had plenty of time to signal its intended reliance on s.1(3). I think that there is room for argument about its effect in the present case, particularly with regard to the correct meaning of a ‘third party … expressly identified … as answering a particular description but [which] need not be in existence when the contract is entered into’. It may be, as Currentbody said at the hearing, that there is authority on this which must be considered by the court.

ISD did not comply with either CPR 24.5(1)(b) or 24.5(3)(b). Subject to other arguments, the issue in respect of the Contracts (Rights of Third Parties) Act 1999 must go to trial.