Aymes International Ltd v Nutrition 4U B.v
| Jurisdiction | England & Wales |
| Judge | Hodge |
| Judgment Date | 19 June 2023 |
| Neutral Citation | [2023] EWHC 1452 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2021-MAN-000039 |
[2023] EWHC 1452 (Ch)
HIS HONOUR JUDGE Hodge KC
Sitting as a Judge of the High Court
Case No: BL-2021-MAN-000039
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
IN MANCHESTER
BUSINESS LIST (ChD)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
Contract — Whether time of the essence of completion of an option contract to purchase shares at a price to be determined by reference to a formula which falls to be applied at a set date — Whether consideration paid for the grant of the option falls to be included in the formula for calculating the purchase price for the shares — Whether purchaser entitled to specific performance of the option contract — Terms of any order for specific performance
The following cases are referred to in the judgment:
British and Commonwealth Holdings plc v Quadrex Holdings Inc [1989] 1 QB 842
British Overseas Bank Nominees Ltd v Analytical Properties Ltd [2015] EWCA Civ 43
Clements v Frisby [2023] EWHC 320 (Ch)
Davis v Spalding (1974) 231 E.G. 373
Grant v Cigman [1996] 2 B.C.L.C. 25
Homepace Ltd v Sita South East Ltd [2008] EWCA Civ 1, [2008] 1 P. & C.R. 24
Lamesa Investments Ltd v Cynergy Bank Limited [2020] EWCA Civ 821, [2021] 2 All E.R. (Comm) 573
Michaels v Harley House (Marylebone) Ltd [2000] Ch 104
Mills v Sportsdirect.com Retail Ltd [2010] EWHC 1072 (Ch), [2010] 2 B.C.L.C. 143
MSAS Global Logistics Ltd v Power Packaging Inc [2003] EWHC 1393 (Ch)
Pena v Dale [2003] EWHC 1065 (Ch), [2004] 2 B.C.L.C. 508
Re Schwabacher (1908) 98 L.T. 127
Revenue and Customs v Secret Hotels2 Ltd [2014] UKSC 16, [2014] 2 All E.R. 685
Simmers v Innes [2008] UKHL 24, 2008 S.C. (HL) 137
Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444
Mr Andrew Latimer (instructed by Hemingways Solicitors Limited, Sheffield) for the Claimant
Mr Francis Bacon (instructed by Freeths LLP, Nottingham) for the Defendants
Hearing dates: 28–30 March, 3 April 2023
Draft Judgment circulated: 14 June 2023
Judgment handed down remotely: 19 June 2023
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HIS HONOUR JUDGE Hodge KC
Remote hand-down: This judgment was handed down at a remote hearing at 10.00 am on Monday 19 June 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
His Honour Judge Hodge KC:
I: Introduction
This is my considered judgment following the trial in Manchester, over four days between 28 March and 3 April 2023, of a Part 7 claim issued on 8 April 2021. The claimant is represented by Mr Andrew Latimer (of counsel) and the defendants by Mr Francis Bacon (also of counsel).
For structural reasons only, this judgment is divided into the following parts (although these are not self-contained and the contents of any one part have informed other parts):
I: Introduction
II: Background
III: Witness evidence
IV: Findings of fact
V: Completion
VI: Company Value
VII: The CEO contract
VIII: Breach
IX: Specific performance
X: Conclusion
This claim concerns the admitted exercise by the claimant, Aymes International Limited, of a call option agreement ( the call option agreement) for the purchase from the first defendant, Nutrition4U B.V. ( Nutrition4U) of the entire issued share capital of the second defendant, NutriMedical B.V. ( NutriMedical), a Dutch company specialising in the development and marketing of nutritional products. The principal issues which fall to be considered are whether: (1) following the exercise of the option, time was of the essence of completion of the resulting contract to purchase the shares ( the option contract) at a price to be determined by reference to a formula which falls to be applied at a set date; (2) the consideration paid for the grant of the option falls to be included in the formula for calculating the purchase price for the option shares; and (3) the claimant is entitled to specific performance of the option contract and, if so, the terms of any order for specific performance.
By a call option agreement dated 31 August 2016 the claimant, a company incorporated in England and Wales, was given the option to purchase from Nutrition4U the entire share capital of NutriMedical. The claimant's founder is Mr Roger Wertheim-Aymes ( Mr Aymes) and he is its sole director and shareholder. The claimant was incorporated on 27 May 2008 but it did not begin to trade until October 2013, once the restrictions associated with the termination of Mr Aymes's former employment with a competitor had expired. The claimant supplies nutritional products in the UK and Ireland but it has no other market share within Europe. It does not manufacture its own products but, by concentrating on the distribution and sale of a single product, it was able to place large orders with the manufacturer and thereby purchase at a discounted price.
Nutrition4U, also a Dutch Company, is the legal and beneficial owner of all the shares in NutriMedical. The third defendant, Mr Alexander (known as Sander) Ketelaar ( Mr Ketelaar), who is a Dutch national resident in the Netherlands, is currently the Chief Executive Officer ( CEO) of NutriMedical, and he serves as its only employee under the terms of a service contract. Mr Ketelaar is also the director and sole shareholder of Nutrition4U. NutriMedical has no appreciable fixed assets, and its value derives from its intellectual property and the goodwill in its nutritional products. NutriMedical originally developed and traded its own products in the Netherlands and Belgium but by the time of the call option agreement it had far more extensive contractual agreements worldwide. NutriMedical possessed a wider range of products than the claimant and this meant that the orders it placed for particular products were smaller and so its manufacturing costs were correspondingly higher.
The parties to the call option agreement include the claimant, Nutrition 4U and Mr Ketelaar (who was joined as a party to the agreement since it provides for him to continue to serve as NutriMedical's CEO after the sale of its shares to the claimant). NutriMedical is not a party to the call option agreement but it has been joined to these proceedings so that it might be present before the court when submissions were made and would be bound by any declaration relating to the terms on which it is to retain Mr Ketelaar as CEO after completion of the sale of the option shares.
The claimant served a notice exercising the call option on 1 April 2020 stating (in accordance with clause 5.1 (c) of the call option agreement) that completion was to take place on 29 May 2020. Completion has still not yet taken place. The claimant contends that Nutrition4U is in breach of the option contract in failing to complete; and it claims: (1) declarations in respect of all three defendants (and, if necessary, an order pursuant to the jurisdiction in Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 to fix the terms of Mr Ketelaar's employment contract as the CEO of NutriMedical); (2) as against Nutrition4U, a decree of specific performance (or damages in lieu), damages for the delay in completion and interest; (3) such further or other relief as the court thinks fit; and (4) costs.
The defendants accept that the claimant validly exercised the call option pursuant to the exercise notice served on 1 April 2020; but they invite the court to find: (1) that the parties are no longer bound by the terms of the option contract on the basis that time was of the essence of that contract, which has now has lapsed; (2) insofar as relevant, that the annual instalments of the ‘Option Consideration’ paid by the claimant to NutriMedical fall, as a matter of construction, to be included in the ‘Relevant Margin’ or ‘Turnover’ in Schedule 1 to the call option agreement when calculating its ‘Company Value’ for the purpose of determining the price to be paid for the option shares; and (3) that it was not reasonable for the claimant to offer to enter into an employment contract with Mr Ketelaar on the terms it has proposed. It should be noted that there is no counterclaim for damages, or any other relief, by any of the defendants.
To ensure that this judgment remains within reasonable, and comprehensible, bounds, I do not propose to address all of the evidence and submissions that have been presented to the court but merely those that are relevant to my decision and its underlying reasoning; but that does not mean that other matters have been overlooked. The reality is that much of the factual (and expert accountancy) evidence that was presented to me, over two court days, was of little real assistance in determining the issues of construction which fall to be decided. Whilst I will make appropriate findings of fact where these are material and necessary to my decision on matters covered by the agreed list of issues, I do not propose to make findings of fact on the many extraneous matters that were ventilated during the course of closing speeches. The submissions of counsel are fully recorded in their helpful and detailed skeleton arguments, and in the closing speaking notes which they kindly provided to me at the conclusion of the trial, so I do not propose to reproduce these verbatim.
II: Background
I can take much of the background to this case from the skeleton arguments of both counsel and from the documents.
Mr Latimer began by addressing the principles of contractual interpretation. He acknowledged that the core issue in the case...
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