Christopher O'Brien v TTT Moneycorp Ltd
| Jurisdiction | England & Wales |
| Judge | Christopher Hancock |
| Judgment Date | 21 June 2019 |
| Neutral Citation | [2019] EWHC 1491 (Comm) |
| Docket Number | Case No: CL-2018-000778 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 June 2019 |
[2019] EWHC 1491 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter lane, London EC4A 1NL
Christopher Hancock QC (SITTING AS A HIGH COURT JUDGE)
Case No: CL-2018-000778
Lance Ashworth QC and Dan McCourt Fritz (instructed by Brabners LLP) for the Claimants
Daniel Toledano QC and Andrew Lodder (instructed by DLA Piper UK LLP) for the Defendant
Hearing dates: 20 and 21 March 2019
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.
Christopher Hancock QC
Christopher Hancock QC (Sitting as a High Court Judge):
Introduction.
Various applications were before me, as follows:
(1) The Claimants' application dated 5 December 2018 (the “ Injunction Application”) seeking an interim injunction (a) requiring the Defendant (“ Moneycorp”) to provide certain documents and information to the Claimants, and (b) prohibiting Moneycorp from taking any further steps in relation to the independent accountant procedure under a Share Purchase Agreement dated 1 December 2017 1 (the “ SPA”) until such date as ordered by the Court;
(2) Moneycorp's application dated 13 February 2019 (“ Moneycorp's Application”) seeking (inter alia) reverse summary judgment in respect of part of the Claimants' claim and summary judgment on its counterclaim; and
(3) The Claimants' cross application dated 1 March 2019 (the “ Claimants' Summary Judgment Application”) seeking the converse relief (summary judgment on their claim and reverse summary judgment in respect of the counterclaim).
(4) An application by Moneycorp to strike out references to correspondence in late June 2018 and in particular an email from Mrs O'Brien dated 25 June 2018 on the basis that it was part of without prejudice correspondence between the parties.
The same essential question was at the heart of the first three applications, namely: was the election notice purportedly served by Moneycorp dated 6 August 2018 (the “ Purported Election Notice”) under paragraph 6 of part 1 of schedule 9 to the SPA (“ Schedule 9”) valid and effective, so that the Independent Accountant had or has jurisdiction to determine the Completion Accounts for First Rate FX Limited (“ First Rate”)?
It was said by the Claimants that the Injunction Application has been largely but not entirely overtaken by the rival summary judgment applications. That is because, if summary judgment is granted to the Claimants in the terms sought then (i) Moneycorp will be required to comply with its Paragraph 5 Obligations on a final rather than interim basis, and (ii) the need for the interim prohibitory injunction will fall away. However, if Moneycorp's Application were to succeed then the Claimants contended that it would still be just and convenient to require Moneycorp to provide the documents and information sought by the Injunction Application, for reasons discussed below.
Finally, as to Moneycorp's strike out application, it is necessary for me to consider this application in the context of considering part of the summary judgment applications, because the material which Moneycorp seeks to preclude the Claimants relying on goes to the question of whether there has been a failure to comply with the provisions of paragraph 5 of part 1 of Schedule 9, an issue discussed below.
Accordingly, after setting out the relevant facts, I will deal with the summary judgment applications, dealing with the strike out application as part of my consideration of those applications. I will then deal, finally, with the Injunction Application.
The facts.
I take the statement of facts set out below principally from the skeleton argument of the Claimants.
By the SPA, the Claimants (who held in excess of 80% of the shares) and two others, collectively referred to in the SPA and herein as “ the Vendors”, sold to Moneycorp the entire issued share capital of First Rate, a foreign exchange business founded by the Claimants.
Prior to completion under the SPA, various daily reconciliations were apparently carried out by the Claimants, which were monitored by Maureen Samsudeen (“ Ms Samsudeen”), an employee of First Rate, and which were also available for inspection by the FCA and by the Claimants' banks. It is the evidence of Mrs O'Brien that these reconciliations did not reveal any significant discrepancies.
Under paragraph 1 of part 1 of Schedule 9 2, the Completion Accounts have to comprise a balance sheet of First Rate as at the Effective Time (which is 31 December 2017) in the form and including the items set out in part 3 of that Schedule.
Paragraph 3 obliged Moneycorp to use its reasonable endeavours to procure the preparation and submission to the Vendors of Draft Completion Accounts within 45 Business Days of Completion.
Paragraph 4 provides:
“4.1 The Draft Completion Accounts shall be deemed to have been accepted by the Vendors as the Completion Accounts unless, within 20 Business Days (increased by the number of Business Day[s] taken to prepare the Draft Completion Accounts over the 45 Business Days referred to in paragraph 3) of their being received by the Vendors, the Vendors deliver to the Purchaser notice to the contrary specifying (i) the item or items disputed; (ii) the Vendors' reasons for such dispute; and (iii) how the Draft Completion Accounts and the Consideration should be adjusted (“ Notice”)
4.2 On receipt by the Purchaser of the Notice, the parties shall endeavour to agree the matters in dispute within 15 Business Days (“ 15 Day Period”). If the parties resolve the matters raised in the Notice during the 15 Day Period, the draft Completion Accounts (adjusted, if necessary, as agreed between the parties) shall be certified by the parties as being the Completion
Accounts and the Completion Accounts shall become final and binding on the parties.”
Paragraph 5 obliges Moneycorp to give (and procure First Rate to give):
“the Vendors (and their respective agents and advisers) access during normal working hours to all relevant files and/or working papers (with the right to take copies at the Vendors' expense) in the Purchaser's and/or the Company's possession or control to the extent that they are reasonably required for the purposes of the review of the Draft Completion Accounts by the Vendors.”
Finally, paragraph 6 provides:
“If the parties are unable to reach agreement within the 15 Day Period, or such other period agreed in writing between the parties, the matter(s) contained in the Notice that remain in dispute may, at the written election of the Purchaser or the Vendors (“ Election Notice”), be referred to the decision of an independent chartered accountant (the “ Independent Accountant”) in accordance with part 2 of this schedule 9.”
Moneycorp, following the SPA, submitted four different versions of the Draft Completion Accounts:
(1) On 6 April 2018, a version was submitted that did not identify any Alleged Client Money Shortfall 3 and stated that the total sum due to Moneycorp was £255,094.13. In response to this, Mr Rumble of KPMG LLP (“ KPMG”), acting on behalf of the Claimants, emailed Mr Chandler of Moneycorp asking for various items of supporting documentation;
(2) On 18 May 2018, following an agreed extension of time for service of a further version, a second set of accounts was served, which identified an Alleged Client Money Shortfall of £969,351.57, with an increase in the total sum said to be due to Moneycorp to £1.074 million;
(3) On 31 May 2018, a third version was served, which identified an Alleged Client Money Shortfall of £1,196,104.30. The total sum now said to be due to Moneycorp had increased to just over £1.3 million; and
(4) On 4 June 2018, a final version was served, which identified an Alleged Client Money Shortfall of £1,058,071.14. The total sum said to be due to Moneycorp had reduced to £1.16 million.
On 6 June 2018, two days after Moneycorp submitted its fourth version of the Draft Completion Accounts, Mr Rumble of KPMG, acting on behalf of the Claimants, emailed Owen Chan of Moneycorp saying:
“We anticipate that we will require the following information for the purposes of reviewing the client monies balances but may
need further information following the meeting we are proposing:• Electronic (excel or database files) lists of all balances by customer comprising: the currency FRFX system E2E balances at 31/1; the amounts not allocated to clients showing source; the details of inflight transactions from E2E
• Copies of bank statements from RBS, Velocity and Saxo
• Copies of client account reconciliations for every day from 31 January through to-date (to enable us to identify funds subsequently received)”
It is the Claimants' case that this email (the “ 6 June Request”) constituted a request for relevant files and/or working papers under paragraph 5. They contend that it is appropriate to infer that Mr Rumble (of KPMG) considered that the documents and information that he requested were reasonably required for the purposes of the review of the Draft Completion Accounts.
On 7 June 2018, Mr Chandler replied to the 6 June Request enclosing a draft of the KPMG Report and stating: “With your information requests in 1 and 2 below [i.e., the first two bullet points in the 6 June Request] you are seeking to reperform the work already carried out by the KPMG buyside team for us.”
On 8 June 2018, Raj Mehta, another of the KPMG accountants acting for the Claimants, stated that the Claimants required “sufficient evidence [to enable the Claimants] to...
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...summarized by Mr. Christopher Hancock, QC (sitting as a High Court judge) in the recent case of O. Brien and another v. TTT Moneycorp [2019] EWHC 1491 (Comm.), which was cited by Mr. Rigby, and which I am happy to adopt: “(1) Sections 37(1)-(2) of the Senior Courts Act 1981 state that the H......