CBPE Capital Fund Viii A LP v Dr Mohamed Taranissi
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 27 October 2021 |
| Neutral Citation | [2021] EWHC 2855 (Ch) |
| Docket Number | Case No: BL-2019-002365 |
| Court | Chancery Division |
[2021] EWHC 2855 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: BL-2019-002365
Rosanna Foskett (instructed by Macfarlanes LLP) for the Claimants
Richard Fisher QC (instructed by Carter Ruck Solicitors) for the Defendants
Hearing dates: 15–19 June 2021
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.
INTRODUCTION
This is my judgment on the trial of a claim under CPR Part 8 for a declaration as to the construction of various documents, but in particular the agreement, contained in a letter of 2 December 2013 (“the 2013 Letter”), made on behalf of the claimants with the first defendant. The claim form was issued on 19 December 2019. Although this was originally a Part 8 claim, on 11 February 2020 it was ordered to continue as a Part 7 claim. Particulars of claim were then served, and subsequently amended. This led to a defence and counterclaim (also amended), which denies the claimant's construction of the 2013 letter, but in the alternative pleads that the letter does not give effect to the parties' agreement or otherwise of the parties were mistaken, and therefore the letter should be rectified. In the further alternative the defendants say that the claimants are bound by an estoppel by convention. There is not only an amended reply and defence to counterclaim, but also a rejoinder.
BACKGROUND
The dispute arises out of an investment made by the claimants, private equity specialists, in a business which was set up and developed by the first defendant. This business was the provision of gynaecological medical services, in the field of assisted reproduction. In simplified, lay terms, the business is that of a fertility clinic. Broadly, the structure of the various entities concerned is as follows. The business itself was carried on by a company called Assisted Reproduction and Gynaecology Centre Ltd (“ARGC”). The entire share capital of this company was purchased and held by another company, the second defendant. The shareholders of the second defendant were (i) the first defendant (as to 540,000 ‘A’ shares), and (ii) the third claimant (as to 360,000 ‘B’ shares), thus totalling 900,000 shares.
In addition, in May 2012 the second defendant issued ‘A’ Loan Notes to the first defendant with a nominal value of £27,180,000, and ‘B’ Loan Notes to the third claimant with a nominal value of £18,120,000, totalling £45,300,000. The loan notes were made pursuant to instruments made on 16 May 2012, together with a subscription and shareholders' agreement (“SSA”) of the same date. It will be seen that both the shares and the loan notes are divided up between the first defendant and the third claimant in the ratio 60:40.
The third claimant holds the loan notes on trust for the first and second claimants. It is owned by CBPE Capital LLP, which indirectly owns CBPE Capital VIII GP Ltd (a Scottish limited company), which is the general partner of CBPE Capital VIII GP LP (a Scottish limited partnership), which in turn is the general partner of each of the first and second claimants, which are English limited partnerships. In all these names, the initials “CBPE” are derived from “Close Brothers Private Equity”, whose business was the subject of a management buyout and is now independent of Close Brothers. In this judgment I will use “CBPE” to denote the claimants and the CBPE entities generally.
From May 2012 until October 2016, the board of directors of the second defendant comprised the first defendant and Anne Hoffmann and Anand Jain of CBPE. In October 2016 Ms Hoffmann left the board (and CBPE). In September 2018 Mr Jain also resigned from the board (but is still part of CBPE). From September 2018 to March 2020 the first defendant was the sole director of the second defendant. In March 2020 CBPE nominated two further directors, relying on provisions in the second defendant's articles and the SSA, though these appointments have been disputed by the first defendant. The latter dispute is not before me, and I do not need to resolve it.
As indicated above, the original deal was done in May 2012. It was intended that the parties would ultimately sell on the investment or list the company. However, during 2013 there was dissatisfaction on both sides with various aspects of the parties' relationship. Discussions took place, which led ultimately to the December 2013 letter agreement already referred to. They also led to a further agreement between Ms Hoffmann and the first defendant in February 2014 which I shall have to refer to in more detail, though the present dispute is not about that agreement. The present dispute is simply about the effect on the pre-existing contractual position of the 2013 Letter.
THE MAIN DOCUMENTS IN THE CASE
(1) The loan notes instrument
There are three main documents in the case. The instrument constituting the issue of £18,120,000 unsecured fixed rate B loan notes of ARGC Topco Ltd is a deed poll dated 16 May 2012. It recites a resolution of that company's board of directors passed on the same date, creating the loan notes. Clause 1 contains various definitions and provisions for interpretation. Those that are most relevant to the present proceedings are the following:
“Conditions the Conditions of the Notes in the form set out in Schedule 1
this Deed this Deed Poll and the Schedules, including any deed or deed poll supplemental to this Deed
Execution Date the date of this Deed
Interest Payment Date as defined in Condition 2.3
Interest Period as defined in Condition 2.4
Interest Rate 10 per cent (10%) per annum
Loan Notes the £18,120,000 unsecured fixed rate loan notes
originally constituted by This Deed, or as the case may be, the principal amounts represented by them and of the time being issued and outstanding, and a reference to a “Loan Note” is a reference to any one of such Loan Notes
Noteholder a person whose name is entered in the Register as the holder of a Note but for the purposes of paragraphs 5 and 6 of Schedule 2, a reference to a Noteholder includes a person who holds A Notes
Notes the Loan Notes and/or the PIK Notes (as the context may require) originally constituted by this Deed, or as the case may be, the principal amounts represented by them and for the time being issued and outstanding, and a reference to a “Note” is a reference to any one of such Notes; and for the purposes of paragraphs 5 and 6 of Schedule 2, a reference to Notes shall be construed as including A Notes
PIK Notes any notes originally constituted by this Deed in respect of a liability to pay interest due on the Notes as may be issued from time to time in accordance with the Conditions, or as the case may be, the principal amounts represented by them and of the time being issued and outstanding, and a reference to a “PIK Note” is a reference to any one of such PIK Notes
Redemption Date the eighth anniversary of the Execution Date
Subscription Agreement the subscription and shareholders' agreement relating to the Company between the Investor and Mr Taranissi (each as defined in the Subscription Agreement)”
Further relevant clauses of the deed are as follows:
“2. Constitution of the Notes
2.1. The aggregate maximum Nominal Amount of the Loan Notes constituted by this Deed is £18,120,000.
2.2. PIK Notes may only be issued to satisfy the payment of interest payable in respect of the Loan Notes, in accordance with the Conditions. Subject to the foregoing, there is no limit on the Nominal Amount of the PIK Notes.
2.3. PIK Notes shall have a maturity date and shall be subject to identical terms and conditions and shall rank pari passu with the Loan Notes as set out in this Deed.
2.4. The Notes may be issued in amounts or integral multiples of £1.
2.5. The Notes are held subject to the Conditions and the provisions contained in the Schedules which are binding on the Company, the Noteholders and any person claiming through or under them respectively. The Conditions and the provisions contained in the Schedules shall have the same effect as if they were set out in this Deed.
3. Interest
Until such time as the Notes are redeemed or repaid, the Company will pay interest on the principal amount of the Notes in accordance with, and subject to, the terms of this Deed and the Conditions.
4. Ranking
4.1. The rights of the Noteholders in respect of the Notes and this Deed rank pari passu and rateably inter se, and, subject to clause 4.2 below, the Notes shall rank at least pari passu with all other unsecured indebtedness of the Company.
4.2. The Notes are subject to contractual subordination arrangements pursuant to which the Notes rank ahead of the A Notes in right and priority in respect of all principal amounts outstanding under the Notes and A Notes pursuant to an subject to clause 17 of the Subscription Agreement.
5. Redemption
As and when a Note (including any PIK Note issued pursuant to Condition 2.4) is due to be redeemed in accordance with this Deed and the Conditions, the Company shall pay to the relevant Noteholder the principal amount of the Note at par together with any accrued but unpaid interest (after deduction of tax which the Company is required to deduct by Law) up to but excluding the date of redemption in accordance with the provisions of Condition 7.
[…]
7. Certificates
7.1. A person on becoming a Noteholder is entitled, without charge, to one certificate for the total principal...
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