S&B Consultancy Services Ltd v Robert Bourn
| Jurisdiction | England & Wales |
| Judge | Mr Simon Birt |
| Judgment Date | 20 September 2022 |
| Neutral Citation | [2022] EWHC 2359 (Comm) |
| Docket Number | Case No: LM-2022-000148 |
| Court | Queen's Bench Division (Commercial Court) |
| Year | 2022 |
[2022] EWHC 2359 (Comm)
Mr Simon Birt KC
(Sitting as a Deputy Judge of the High Court)
Case No: LM-2022-000148
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND & WALES
LONDON CIRCUIT COMMERCIAL COURT (KBD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr William Harman (instructed by Cooke, Young & Keidan LLP) for the Claimant
Ms Alison Potter (instructed by Spring Law Limited) for the Defendants
Hearing date: 6 September 2022
Mr Simon Birt KC:
This is an application brought by the Claimant for strike out and/or summary judgment in relation to one of the issues that arises in this claim. The issue in question concerns section 26 of the Financial Services and Markets Act 2000 (“ FSMA”) and in particular the meaning and scope of section 26(3) and its application to the facts of this case. If the Claimant's application were to succeed, it would not dispose of the claim and there would still need to be a trial to deal with other issues that arise, but such success would (as both parties acknowledge) lead to some savings in terms of time and cost at the trial.
Background and the claim
The Claimant is a company in the business of, among other things, introducing businesses to potential funders.
The Defendants were general partners of a limited partnership called Agricultural Mortgage Finance Limited Partnership (“Agri”) until it was dissolved on or around 3 October 2020.
On 28 April 2020, the Claimant and Agri entered into an Introductory Agency Agreement (“the IAA”), under which Agri appointed the Claimant to introduce Prospective Funders (as defined under clause 1.1 of the IAA) to Agri. Clause 4.1 of the IAA provided that the Claimant would be entitled to a fee in certain circumstances, namely if Agri (including any subsidiary or related person or company) entered into a Relevant Contract (also as defined under clause 1.1 of the IAA) or any other commercial agreement with a Prospective Funder introduced by the Claimant. Clause 4.2 provided that the fee would be 2% of the gross facility provided by the Prospective Funder, payable upon completion of the Relevant Contract, and clause 4.3 provided for a further fee in the event of Agri and a Prospective Funder entering into any future commercial agreement directly. I refer to the terms of the IAA in greater detail later in this judgment.
Between August and September 2020, the Claimant introduced Agri to a Prospective Funder known as the Arrow Group Global (“the Arrow Group”).
There was then a period of time over which the potential funding to be provided by the Arrow Group to Agri was discussed and negotiated. The Claimant remained involved, though the extent of its involvement and the proper characterisation of its activity and involvement over this period is a matter of dispute in these proceedings, as further identified below. The Defendants contend that the Claimant's activities over this period amounted to carrying out regulated activities in breach of section 19 of FSMA.
The Arrow Group subsequently entered into a Pre-Funding Agreement (the “Pre-Funding Agreement”) with a company called Farm Finance Limited (“FFL”). The Defendants are directors of FFL and have an ownership interest in a company which has an ownership interest in FFL. The Arrow Group also entered into an Asset Backed Facility Agreement related to the Pre-Funding Agreement, and a Working Capital Facility Agreement. It is the Claimant's case that these three agreements (which the parties refer to collectively as the “Facility Agreement”) are all Relevant Contracts within the meaning of clauses 4 and 1.1 of the IAA.
As a result, the Claimant contends that the Defendants are liable under clause 4.1 of the IAA to pay the Claimant a fee equal to 2% of the gross funding limit under the Facility Agreement and any other Relevant Contracts or other commercial agreements between persons or companies related to Agri and the Arrow Group, and also that the Defendants will be liable to make payment to the Claimant under clause 4.3 in the event that any person or company related to Agri enters into a future commercial agreement with the Arrow Group directly.
Following disclosure, on the Claimant's understanding of the agreements that it is now able to contend are Relevant Contracts, it says it is entitled to a fee of at least £2.08 million.
The Defendants admit that, as former general partners in Agri, they would be liable for any fees owed by Agri to the Claimant under the IAA. However, they contend that Agri (and therefore the Defendants) are not so liable for a series of reasons. In summary, they say there is no liability because:
(1) On a proper construction of the IAA, the fee was to be collected from the Prospective Funder, and not from Agri.
(2) The Claimant is estopped from asserting that the fee is due from Agri (or the Defendants) pursuant to market convention, common assumption or representation to the effect that the fee would be paid by the Arrow Group and not by Agri.
(3) It is not admitted that FFL was a company related to Agri within the meaning of clauses 4 and 1.1 of the IAA. 1
(4) The IAA is unenforceable against Agri or the Defendants under section 26 of FSMA as a result of the Claimant engaging in regulated activity in breach of the general prohibition under section 19 of FSMA. The Claimant was, as is admitted, not authorised by the FCA to carry out any regulated activity.
The issue on which the Claimant now seeks summary judgment and/or in respect of which it seeks a strike out is one that arises under the last of these defences. In order to place the issue in context, it is necessary to identify the Claimant's response to the defence under section 26 of FSMA. In summary, the Claimant contends:
(1) It did not carry on any regulated activity, and thus nothing that it was doing engaged the prohibition under section 19 of FSMA.
(2) Even if it had been carrying on any of the regulated activities alleged by the Defendants, those activities were not, and could not have been, carried on in performance of the IAA and, as a result, the IAA is not rendered unenforceable under section 26 (more specifically, the IAA does not constitute an “agreement” under section 26(3)).
(3) Alternatively, if the Claimant is wrong and the IAA is unenforceable under section 26, it invites the Court to permit its enforcement pursuant to section 28(3) of FSMA on the basis that it is just and equitable to do so.
The Claimant recognises that, for the purpose of this application, it must accept the Defendants' position as to (1) and (3) above, those matters not being suitable for summary determination, but it says that even if the Defendant's position is accepted in those respects, the Claimant must succeed on (2) as a matter of construction of (i) section 26, and (ii) the IAA. The Claimant contends, therefore, that there is no dispute of fact that needs to be resolved for the purpose of this application, and that a determination of this part of its response to the section 26 defence is suitable for summary determination.
The Application
This application was issued on 9 May 2022. By it, the Claimant seeks an order that “paragraphs 43 to 54 of the Defence are struck out and/or summarily dismissed” (those being the paragraphs containing the defence that the IAA is unenforceable under section 26 of FSMA), on the basis that the defence advanced in those paragraphs has no real prospect of success and/or discloses no reasonable grounds for defending the claim.
The application notice also included an alternative basis for the application, namely (so the Claimant contended) that those paragraphs of the Defence had been inadequately pleaded. On the day before the hearing of this application, the Defendants served a document entitled “Voluntary Particulars of Defence” expanding upon what had previously been pleaded at paragraph 50 of the Defence concerning the regulated activities that the Defendants allege the Claimant had undertaken. In the light of that document, Mr Harman (who appeared for the Claimant) confirmed at the hearing that he was no longer pursuing the application on this alternative basis, but did so expressly without prejudice to the form and content of those particulars, in particular as to whether those particulars are adequate in terms of a pleaded case. In those circumstances, I say no more here about that alternative basis for the application.
For the purpose of its application (and only for that purpose) the Claimant accepts certain matters (recognising that it cannot ask the court to determine them on a summary basis). Most importantly, these include the allegation that the Claimant carried out the regulated activities alleged by the Defendants and that doing so was a breach of the general prohibition under section 19 of FSMA. For obvious reasons, Mr Harman stressed that this was not any sort of admission on the part of the Claimant that it did carry out those activities or that it was in breach of section 19, but rather it was an acceptance that this application would proceed on the basis that the Defendants were right about those matters.
There was no dispute between the parties as to the general approach to be taken by a Court on an application for summary judgment, and both parties were content to refer to the oft-cited summary given by Lewison J in EasyAir Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) at paragraph 15:
“i) The court must consider whether the claimant has a “realistic” as opposed to a...
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S&B v Bourn ' The Thresholds And Parameters For Claimants Seeking Summary Judgment
...20 September 2022, the High Court handed down a judgment in S&B Consultancy Services Limited v Bourn and Anor [2022] EWHC 2359 (Comm), a claim relating to unpaid fees under an introducer agreement. The court dismissed the claimant's application for summary judgment on a portion of the Defen......