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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Screen Partners London Ltd v VIF Filmproducktion & Co Erste KG & Ors [2001] EWCA Civ 2096 (21 December 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/2096.html Cite as: [2001] EWCA Civ 2096, [2002] Lloyd's Rep IR 283

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF MR DAVID MACKIE QC
(Sitting as a Deputy High Court Judge)

		Royal Courts of Justice Strand London WC2 Friday, 21st December 2001

1. LORD JUSTICE MUMMERY: This is an appeal from an order made by Mr David Mackie QC, sitting as a Deputy High Court Judge in the Chancery Division, on 5th April 2001. He ordered that there be summary judgment under CPR 24 for the defendants on the claim against them by the claimant, Screen Partners London Ltd, and that, accordingly, the claim should be dismissed and an order was made that the claimant pay the defendants' costs of the application and of the action. He subsequently refused permission to appeal to this court on the basis that the issue was a point of construction on which he concluded that the claimant was clearly wrong and that he did not consider that the appeal had a real prospect of success. Permission to appeal was granted by Lord Justice Aldous on 25 June.
2. The claimant ("Screen Partners") is an insurance risk manager involved in actively assembling finance packages for films in return for a share of the proceeds of the films. Screen Partners is also involved in advising insurers about the risks they should adopt and how to manage them. It is asserted that it is a pioneer in this field. It has developed a special form of cover since the early 1990s that has come to be called TVC, which is short for "time variable cover".
3. The three defendants are limited partnerships incorporated in Germany. Their managing director is Mr Wolfram Tichy. They are film production and investment enterprises involved in financing, producing and pre-selling films before they are finished. The pre-selling takes the form of disposing, among other things, of distribution and marketing rights in the film that is intended to be made. It is often the case that the costs of production of the film exceed the receipts from the pre-selling activities, so that there is a gap or shortfall between the costs and the receipts.
4. These proceedings arise out of contracts alleged to have been made between Screen Partners and the defendants, as evidenced by two letters, one of 13 November 1998 and another in very similar terms on 6 May 1999. I shall turn in a moment to the terms of those letters.
5. Screen Partners' case is that the defendants have acted in breach of final concluded valid contracts and claim damages for breach of contract in proceedings initiated by a claim form issued on 21 June 2000. It claims an order restraining each of the defendants from seeking to obtain TVC insurance or any other form of gap/shortfall insurance in respect of any films or television productions in which those defendants invested or proposed to invest other than through Screen Partners acting as risk managers for the proposed TVC insurance. Further, or alternatively, damages are sought under paragraph 21 of the particulars of claim, in which it is alleged that, if the defendants are correct in asserting that there is no binding agreement between Screen Partners and the defendants, Screen Partners have always conducted themselves in a manner commensurate with there being a joint venture or partnership in matters or services carried out by Screen Partners and expenditure carried out or incurred by Screen Partners. Alternatively, there is a claim for a quantum meruit as against the defendants.
6. The pleadings in the action proceeded in the normal way with a defence being served on 23 August 2000 and a reply on 8 September 2000. A date for a five-day trial was obtained for the beginning of July 2001. At a comparatively late stage in the proceedings, though not entirely to the surprise of the claimant, an application was taken out by the defendants under CPR 24 seeking summary dismissal of the claim. The application was issued on 17 January 2001 and was heard by the deputy judge at the end of March.
7. I should refer to the basis on which the claim was made, as described in Mr Wolfram Tichy's witness statement of 17 January 2001. He said that there was an issue of construction arising on the terms of the fund letter agreements of 13 November 1998 and 6 May 1999 and on the construction of the Screen Partners policy and what is described in the evidence as "the new policy" which was, in fact, obtained by the defendants. The issue was said to be suitable to be resolved summarily. It is said in paragraph 7 of his witness statement that the defendants were willing to concede that the agreements were valid and binding for the purposes of the summary judgment application. The paragraph continues:

"As I understand it, that would resolve all the issues between the parties and accordingly there is no reason why this matter need proceed to trial."

8. That has, in effect, been the defendants' position throughout this application.
9. I should next turn to the documents on which the construction arguments are based. First, the fund letter agreements. The first letter dated 13 November is headed "Fund letter agreement" and is sent from the defendants to Screen Partners, saying:

"Dear Sirs,

Further to our various discussions, we are writing to set out the fundamental arrangements between us relating to the film and television production fund being raised from German investors and administered by VIF."

10. It is provided, by way of restating the agreement between the parties in paragraph 2:

"Screen partners will procure insurers who will be the providers of so-called `Shortfall Insurance' or TVC Insurance to VIF on the following terms:

2.1 Screen Partners undertake to procure TVC Insurance to cover 75% of each of VIF's investments in film and television productions ..... "

It continues in various paragraphs - 2.3, 2.4 and 2.6 - to refer to "the TVC insurance".

11. There was a further fund agreement fax dated 6 May 1999 sent from Caroline Hamilton, who is a director of Screen Partners, to Mr Wolfram Tichy saying:

"Dear Wolfram,

Fund TVC arrangements

Further to our meetings ..... and our subsequent telephone conversations, I am writing to confirm what we have agreed in respect of the above. The following will apply to both VIF and the further DM50 million fund which you are raising through ING Bank:

1. Screen Partners/the TVC insurers will be the exclusive providers of TVC, shortfall or gap insurance to both the funds."

12. I miss out paragraph 2. Paragraph 3 provides:

"3. Subject to our risk management criteria, including our approval of the project and the TVC insurance required in each case, Screen Partners will procure TVC insurance to secure the funds' investments in film and television projects."

13. After various other provisions are set out, the letter concludes:

"I should be very grateful if you would confirm your and ING's agreement to the above by signing in the space below. We will then incorporate these arrangements into a revised version of the Master TVC Agreement for VIF as well as in a separate Master TVC Agreement for the ING Fund."

14. The letter is signed by Caroline Hamilton, and Wolfram Tichy has given his signature to it dated May 6 1999.
15. In the last year there has been litigation which has reached this court concerning the kind of insurance referred to in the fund letter agreements. In HIH Casualty and General Insurance Ltd v New Hampshire Insurance Company Independent Insurance Company Ltd [2001] 2 Lloyd's Rep (Re-insurance) 596, 605 at paragraph 2 of the judgment of Lord Justice Rix, the insurance concerned is described in this way:

"The insurance concerned is of a somewhat novel kind. It is of a class called `pecuniary loss indemnity' insurance. In essence, it provides collateral for film finance. The peril insured is the risk thatrevenues from the films concerned will fail to reach the sum insured within a certain period. The sum insured is premised on the costs of production. The insurance is designed to enable the investors whose finance supports the production of the films to recoup their investment. Either they are paid from the films' revenues, or from the insurance, or from a combination of the two. If the films are successful, the insurer is not called upon to make any payment. If the films earn nothing whatsoever, the insurer is liable to pay the whole sum insured. If the films earn something but not enough, the insurer makes up the difference, up to the sum insured. The account is struck at a fixed date. The insurer may, however, manage to recoup more or less of its loss either from later earnings of the films, or from other protection or collateral for which he stipulates and upon which he may have either a direct or subrogated claim."

16. In paragraph 4 Lord Justice Rix said this:

"If this kind of insurance is novel, at any rate to the English courts, it bears some resemblance to commercial mortgage indemnity insurance, under which a lender of an advance secured on a mortgage insures against the risk that, following a default by the borrower, the security will not repay the principal of the advance, interest and associated costs. The point of resemblance is that the insurer is not insuring against damage or liability but against the risk that the insured's investment will not be repaid. There are, however, important differences. In commercial mortgage indemnity insurance the property concerned is usually built and let, and its investment value can, subject of course to market fluctuations, be assessed, as can the creditworthiness of the borrower. The insurer can therefore evaluate whether the loan is likely to be repaid, and it is only if the borrower defaults that the insurer can be called upon to pay at all. In what I shall call film finance insurance, however, the insurer's gamble is much purer. The films are not yet made, their earning potential is peculiarly difficult to evaluate and might remain so even when they have been made, and the insurer must pay, whatever the creditworthiness of the borrower, unless the films quickly earn revenues which at least match the sum insured."

17. The other two documents that fall to be construed against that background are the TVC policy and, secondly, what is called "the new policy", which was obtained by the defendants in preference to the TVC policy and - it is said by Screen Partners - in breach of the contract concluded in the two letters of 13 November 1998 and 6 May 1999. I should mention that it is not accepted by the defendants that those letters resulted in valid and binding contracts. As I understand their case, reliance is placed on the contemplation expressed at the end of the 6 May letter that there would be terms referred to in the letter which would be incorporated into a subsequent master agreement.
18. The first policy is the one that has been developed by Screen Partners and is called shortfall contingency insurance for film and television productions, TVC insurance. Having stated who the insured are, there is then an insuring clause which provides:

"This insurance is to indemnigy the Assured(s) for their Ascertained Net Loss in relation to the Production, up to but not exceeding the Sum Insured."

"Ascertained net loss" is then defined as -

"the whole or any part of the Sum Insured outstanding and unpaid from Net Revenue as at the Clain Date."

19. The "Sum Insured" is defined as -

"the maximum amount of Insured Expenses as set out in the Schedule, having been agreed with Risk Managers."

20. Under the heading "Insured Expenses" the definition appears -

"the difference between the Budgeted Production Costs excluding the Sum Insured and the Actual Production Costs, provided the Actual Production Costs eexceed the Budgeted Produciton Costs less the Sum Insured ..... "

21. There are further definitions: "Actual Production Costs" as

"the amount not exceeding the amount of the Budgeted Production Costs incurred until the Clain Date in respect of the Production";

and a definition of "Budgeted Production Costs" as -

"the amount specified in the Schedule being the maximum amount which the Assured(s) anticipates will be spent on the Production including the Sum Insured, the premium for this Insurance, the taxes payable under this Insurance which are specified in this Schedule, interest payable under the Co-Production Agreement up to the Claim Date and the Reserved Cash."

22. There is then a definition of the Collection Account, which is a separate interest bearing account into which all the proceeds of the exploitation of the production, excluding amounts payable under finance agreements, are to be paid. There is a definition of "Net Revenue" as -

"revenue less sales commissions, sales expenses agreed by Risk Managers plus any amounts of Reserved Cash (including accrued interest) returned to the Assured in accordance with the Reserved Cash Agreement."

23. Attached to that document is a schedule which is and remains blank because it was never completed. It is clear from paragraph 5 of that schedule which refers to "(a) Sum Insured" that there is to be inserted when it is completed an agreed fixed sum.
24. The new policy, with which detailed comparison has been made during the course of argument and in a very helpful detailed schedule of comparisons, is called in the heading a "Pecuniary Loss Indemnity Policy". After various recitals there appears the insuring clause, which provides as follows:

"Now, therefore, if on the last day of the waiting period as expressed in the Schedule, the Net Receipts paid into the Collection Account and applied by the Collection Agent in accordance with the provisions of the Collection Account Agreement are less than the Limit of Indemnity, as expressed in the Schedule, as a consequence of the occurrence of the Insured Peril, the Insurers will pay to the Assured, on that day or on the nearest business day following, the difference between the Limit of Indemnity and the Net Receipts, subject only to the Exclusions set forth below."

25. There are definitions, the most important of which is the definition of "Insured Peril". "Insured Peril" means -

"aggregate Net Receipts paid into the Collection Account during the period ending on the Claim Determination Date being less than the Limit of Indemnity for whatsoever reason."

26. There is a definition of "Gross Receipts" as -

"all gross revenues derived from the exploitation of the Film throughout the universe, excluding the Excluded Territories, including revenues derived from any merchandising and other ancillary rights in the Film and the net proceeds of government subsidies and the like, but only to the extent that monies are actually received and credited to the collection Account in cleared unconditional funds, but without deductions."

27. In paragraph 19 under the heading "Limits of Indemnity" it is provided that that should be the sum set out in the schedule. In this case the limited indemnity in the completed schedule attached to and forming part of the policy states that that figure is 4.5 million deutschmarks. So, as Mr Dunning for Screen Partners pointed out in his argument, just as the limit of indemnity is a pre-agreed figure so the insured sum in the TVC policy schedule is for a pre-agreed sum. He submits that both of these policies work in the same way and cover the same risk as the TVC shortfall or gap policy.
28. Against that background the claim made by Screen Partners is that the defendants acted in breach of the agreement constituted by the two letters by obtaining a TVC policy or a gap or shortfall insurance policy from a third party. Alternatively, as has already appeared from the pleadings, if the two letters did not constitute a concluded contract, then a quantum meruit is claimed in respect of services rendered.
29. Evidence was put in on the application under CPR 24. It revealed that there were different views between Mr Tichy of the defendants and Miss Caroline Hamilton of Screen Partners about the nature of the TVC policy and whether the new policy, as it is called, was the same as, or different from, the TVC policy. Screen Partners asserts, and the defendants deny, that the new policy is caught by the terms of the letter agreement and, in particular, the exclusivity obligation referred to in the letter of 6 May 1999. We were referred to some of the evidence before Mr Mackie QC, in particular, to parts of the witness statement of Caroline Hamilton and paragraphs 6, 9, 11 and 12 of that statement in which she explained the nature of the insurance and how it works in the film industry. She said in paragraph 6:

"With a policy of shortfall/gap insurance in place, the financier will provide a production loan not just on the basis of pre-sales and other investments but also on pre-agreed estimates of future sales of the Film. Provided that the terms of the shortfall/gap insurance are met, if the Film fails to generate sufficient revenue in the unsold territories to repay the `gap' portion of the production loan by a certain date, the insurers are required to pay the shortfall. The earliest type of shortfall/gap insurance was called TVC insurance. The Pecuniary Loss Indemnity Policy is the same as TVC insurance as it also covers the risk that the `gap' portion of the production loan cannot be repaid because of a shortfall in revenue from the unsold territories. The insurance policies have different names because they were developed by different parties."

30. Miss Hamilton points out in paragraph 9 of her witness statement that the figure of the sum insured in the schedule to the TVC policy has been calculated before the policy is issued. She makes comments on the pecuniary loss indemnity policy or new policy, contending that it operates in exactly the same way as TVC insurance. She said this:

"11. In both cases, if the money received in the Collection Account from the exploitation of the Film in the unsold territories is less than the amount of the outstanding gap portion of the production loan, the insured can claim against the insurance. The intention and effect of the Pecuniary Loss Indemnity Policy is exactly the same as TVC insurance."

31. She said at paragraph 12:

"The precise wording of the Policy and the Pecuniary Loss INdemnity Policy is different simply because the policies are led by different insurers. The important thing is that, like the Policy, the Insuring Clause of the Pecuniary Loss Indemnity Policy provides that the insurance is triggered if Net Receipts paid into the Collection Account are insufficient to repay outstanding loans. This is the same as the Ascertained Net Loss clause of the Policy."

32. There was also evidence on the CPR 24 application on behalf of Screen Partners from an expert, Mr Roger Day, whose CV is attached to his witness statement. What Mr Day says, by reference to an exhibited document containing a description of the TVC insurance and pecuniary loss indemnity insurance by Miss Hamilton, is that he agrees with the description of the TVC insurance, the pecuniary loss indemnity insurance, as set out in paragraphs 9 to 11 of that description. His opinion is limited to the essential area of risk intended to be covered by the two policies. He said at paragraph 6:

"TVC insurance is a form of insurance which fundamentally covers the deficit financing risk which the financier assumes. In other words, that part of the financing which is not protected, for example by pre-sales, tax shelters and deferments. The real risk is centred on the ability of the film in question to generate sufficient additional funds from specified territories to repay this part of the financing. It represents a risk of lack of commercial success."

33. He expressed the view in paragraph 7 that the pecuniary loss indemnity insurance policy -

"seeks to cover the same type of risk as the TVC policy, that is, deficit financing where the risk is the lack of commercial success of the film."

34. He concludes that, in his opinion, it operates in exactly the same way as TVC insurance.
35. In his judgment the deputy judge concluded with these words at paragraph 13:

"It is in my judgment clear that Screen Partners has no prospect of succeeding on this point."

36. That is the point of construction to which I shall return.

"It is a conclusion I reach without enthusiasm since Screen Partners have invested in this proposed deal and have done substantial work to which the defendants at one point attached value and importance."

37. The crucial paragraph in the judge's judgment is paragraph 8, in which he summarises the submissions made by Mr Flynn for the defendants and which he accepted, as explained in paragraph 13 of his judgment. In summarising Mr Flynn's submissions for the defendants, which relied on three witness statements from Mr Tichy, he said:

"Mr Tichy explains TVC as he sees it. Time variable or contingent expenses are the amount by which the actual cost of producing a film exceeds the budgeted costs (excluding the sum insured) provided that the excess comprises an amount incurred as a result of a contingent event or an event dependent upon the lapse of time beyond the control of the assured. Mr Tichy exhibits the latest version of the draft TVC Policy produced by the claimant to the defendants. The insuring clause provides for the insurance to indemnify the assured for their ascertained net loss in relation to the production up to but not exceeding the sum insured. It is clear from this Policy and the definitions in particular, (see for example `insured' page 1) that the Policy is concerned with the difference between budgeted and actual production costs. He contrasts this draft with the `Pecuniary Loss Indemnity Policy' (known as `the New Policy') actually taken out by the defendants which is the cause of the alleged breach. This Policy gives an indemnity against the difference between receipts as variously defined (in essence revenue from the exploitation of the film throughtout the universe) and a limit of indemnity specified in the schedule. As Mr Tichy puts it the New Policy provides an indemnity to the assured if the proceeds of distribution of the completed film are less than a stated sum. It is an insurance of the risk of the film not producing an adequate commercial return from sales as opposed to the risk of costs of making it exceeding budget."

38. The deputy judge referred briefly in paragraph 10 of his judgment to the expert evidence from Mr Day. He went on in paragraph 13 to set out succinctly his reasons for accepting the defendants' submissions that Screen Partners' claim had no real prospect of success on the issue of construction. He said:

"As I see it the position is straightforward. First what, in their context and set against the factual matrix do TVC, shortfall and gap mean? Secondly does the insurance obtained by the defendants have any prospect of being held to fall within that meaning? It seems to me arguable. at least on the face of the 6th May fax, that the expressions TVC, gap and shortfall should be read disjunctively so that exclusivity extended beyond TVC itself (although there is a sound argument to the contrary starting with the apparently synonymous use of `shortfall' and `TVC' in the Fund Letter Agreements.) But that argument does not help the claimant. It is clear from the claimant's own pleading, from the defendants' evidence and from the documentation and evidence of the claimant that the `gap' or `shortfall' is that between pre-sale receipts or budgeted costs on the one hand and actual production costs on the other."

39. I pause to mention that my hesitation is caused by the fact that the deputy judge at this point, we are told, after he had handed down a typed judgment, added certain words in manuscript.

"Having identified what TVC/gap/shortfall is one decides whether the New Policy may fall within it. This analysis is not to be carried out by a broad examination of whether, as the claimant put it `the effect of each of these types of Policy is the same'. The fax of 6th May makes Screen Partners the exclusive providers of the specified insurance not of any insurance which may, in some circumstances, have the same effect. Very different insurance policies may have the same or similar effects. There are similarities between the Policies. They are both means of securing risks in the production and distribution of films. But the risks are different. The fact that the proceeds of a claim may also include unbudgeted production costs indirectly is irrelevant. The New Policy is concerned with insuring against loss of revenue. The New Policy does not cover what the particulars of claim, when characterising the claimant's insurance describes as `the difference between the advances which are guaranteed to be received from distributors and the total cost of a film for television production' or `the opportunity for insurance cover in respect of the gap or shortfall between the pre-sale receipts and the total budget'."

40. It is on that point on which the deputy judge goes on to say:

"There is no real prospect of the New Policy being held to be TVC, shortfall or gap insurance in the sense meant by the contractual letters."

41. He concluded with the passage I quoted earlier.
42. The judge went on to consider that there was no other compelling reason why the case should be disposed of at trial. He said in paragraph 15 that the result of his conclusions, according to the defendants, was that -

"the remaining quasi-contractual claim will fall away. [Screen Partners] did not contend otherwise at the hearing" -

with the consequence that it was accepted that there should be judgment for the defendants as asked.

43. In his very helpful submissions Mr Dunning said that his primary case was that both the TVC policy and the new policy were forms of gap/shortfall insurance. His alternative submission was that the new policy was a gap/shortfall insurance within the meaning of the fund agreement letters. He submitted that the judge had wrongly rejected the case put forward by way of defence by Screen Partners to the application under CPR 24 because he had misunderstood the policies. He analysed the reasoning of the judge, breaking it down into three stages. The first was that the judge had held that TVC covered the risk of budgeting overrun; secondly, that the expression "shortfall/gap" had no wider meaning than TVC; and, thirdly, it followed that the new policy was not a shortfall/gap policy within the meaning of the letter of 6 May 1999. His case is that this reasoning is fallacious and that the judge should have held that at the very least that there was a real prospect of Screen Partners being able to establish at trial either that both policies are shortfall/gap policies or, if both are not, the new policy is.
44. It is important to remember that this case is not concerned with deciding who is right and who is wrong on the construction of the two letters and the two policies. It is a question as to whether Screen Partners has a sufficiently good case to go to a trial.
45. Mr Dunning accepts that the deputy judge was right to compare the two policies. He says that they do not have to be identical as has been submitted on behalf of the defendants. The true question, he says, is whether the new policy is caught by the wording of the letter of 6 May. On that, expert evidence, such as that given by Mr Day, is relevant. He submits that the reasoning of the judge - which I have read out at paragraphs 8 and 13 of his judgment - does not justify the judge's ultimate conclusion that Screen Partners has no real prospect of success. He has not in those paragraphs accurately analysed the true legal position. He says that in the case of both policies the sum insured is a pre-agreed figure. He says that the policies are virtually identical and both are concerned with shortfall revenue. They are both shortfall policies. That description of the TVC policy is also true as a description of the new policy. He submitted that there were errors in the judgment, in the judge holding first that the TVC policy covers shortfall of proceeds between the proceeds and the agreed insured sum. He says that is a misreading of the policy. The judge was also in error in holding that the TVC policy concerned differences between actual costs and budgeted costs.
46. Mr Flynn, on behalf of the defendants, sought to uphold the judgment and disputed Mr Dunning's criticisms of it. He said there were differences between the two policies, that the decision on this point was a matter of construction of the two letters and of construction of the two policies and that it was not necessary to have a full blown trial in order to determine that matter. He drew attention to the fact that TVC policies are regularly placed at Lloyd's, but the pecuniary loss policy cannot be placed at Lloyd's, according to the regulations to which he referred, without the permission of the Council. He referred us to the way in which the case was pleaded and made criticisms that the case was being put in a different way by Mr Dunning. He put it differently then to counsel who appeared below. He objected to this new way of putting the case, saying that new points could not be raised on appeal when there had been opportunity to take them below. He referred us to Screen Partners' literature to strengthen his position that the TVC policy was a different form of insurance than the new policy and therefore not caught by the exclusivity provision in the letter of 6 May. He emphasised in a detailed comparison that there are features in the TVC policy which are not to be found in the pecuniary loss indemnity policy.
47. As to a different case being advanced on appeal, I should mention that Mr Flynn referred to two recent authorities relating to the management of civil litigation, in particular, since the introduction of the CPR regime. For myself, I did not find these authorities helpful on the facts of this particular case. He referred to paragraph 52 in the judgment of Lord Justice May in Jones v MBNA International Bank, unreported, transcript dated 30 June 2000. I need not quote the paragraph. It is clear that was a case of new points being taken on an appeal after a trial which had taken place over a period of several days resulting in a final judgment. I remind myself that this is not the trial of the case, though at times during the hearing it seemed like it. It is not even the trial of a preliminary issue. The issue is simply whether Screen Partners is entitled to have a trial of the issues that arise in the case.
48. The second case contains interesting observations by Lord Justice Mance in relation to seeking to introduce new evidence and new claims on an appeal in a case where there had been a trial on a preliminary issue; that is Australia and New Zealand Banking Group Ltd v Societé Generale [2001] All ER (Commercial) 682, the passages in question being from paragraphs 18 to 21 of the judgment of Lord Justice Mance. No one doubts the importance in trials, whether they be the final trial or the trial of a preliminary issue as a prelude to a possible final trial, of people advancing all their claims and all the evidence reasonably available to them at that time and not to bring it for the first time to a court on appeal. In my judgment, those considerations do not apply to this case.
49. The position is that I am satisfied by the arguments I have heard from Mr Dunning that, contrary to what was held by the deputy judge, Screen Partners does have a real prospect of succeeding in their contractual claim in this case. At the end of the day the defendants may turn out to be right, but they may turn out to be wrong. The point is, as I have already emphasised, the court is not concerned at this stage in this litigation to decide who is right and who is wrong, but simply whether the claim has a real prospect of success. For my part, it does. I would therefore allow the appeal.
50. I should add there is a further reason, in my view, why a trial in this case is inevitable. It seems clear that the restitutionary claim for a quantum meruit, has not at any stage been abandoned by Screen Partners. It is true that the case before the deputy judge was fought on the basis that the defendants conceded that for the purposes of their application there was a valid and binding contract and if, on the true construction of it, it was found that there had been a breach they would accept that as the final decision in the case. I have been unable to find anything in the judge's judgment or in any of the arguments before him of which it could possibly be said that, if it turned out that Screen Partners failed in its arguments in relation to the claim for breach of contract, it either expressly or impliedly abandoned its claim to a quantum meruit, which was advanced, in the alternative, on the basis that, contrary to its primary submission, there was no contract.
51. No attempt has been made to say that the quantum meruit claim has no real prospect of success. So there will have to be a trial of it. The investigation of matters in relation to the quantum meruit claim would go over much the same ground as would be involved in a contractual claim. I add that as another reason why, in my view, the judge was wrong to dismiss the action of Screen Partners. For all those reasons I would allow this appeal.
52. LORD JUSTICE RIX: I agree. Ultimately, for present purposes, the critical question is whether the new policy is a "TVC shortfall or gap insurance" within the meaning of those words in paragraph 1 of the 6 May fax. The deputy judge did not construe the meaning of the words "shortfall" or "gap" for the purposes of that paragraph. He concluded that he did not have to do so. Nevertheless he decided that there was no prospect of the claimant succeeding in showing that the new policy was a TVC shortfall or gap insurance in the sense of the fax. In coming to that conclusion, he formed a view as to the nature of both the claimant's proposed policy and the new policy and considered that although they had similarities they essentially insured different risks.
53. I am not persuaded of the accuracy of the judge's analysis in the critical paragraph 13 of the judgment. He concluded that the new policy is concerned with insuring against loss of revenue. If he had expressed himself by saying that the new policy is concerned with insuring against a shortfall of revenue he might have concluded that the new policy was a form of shortfall insurance.
54. In truth, however, it seems to me that the question of what shortfall or gap insurance is for the purposes of the parties' arrangements, albeit ultimately a question of construction, is one that may well have to be decided with the help of expert market evidence. The defendants themselves proposed at an interlocutory stage of these proceedings the need for expert evidence.
55. I am in full agreement with my Lord's judgment that the questions of construction are ones that have to go to trial. I also agree that the restitutionary claim for a quantum meruit - a claim which it is accepted by Mr Flynn, on behalf of the defendants, has not been abandoned - is one which has never been considered on its merits, one which the defendants have never sought to strike out under a Part 24 application and one that has to be dealt with ultimately at trial.
56. SIR MURRAY STUART-SMITH: I agree. This appeal should be allowed for the reasons given by my Lord.
Order: Appeal allowed with costs here and below, detailed assessment of same. Defendants to pay within 21 days £30,000 on account of costs here and below. Sum paid by Screen Partners to defendants' solicitors to be repaid with interest 1 per cent above base rate within 21 days to Screen Partners' new solicitors in respect of costs below. Sum provided in respect of security of costs be released to Screen Partners.