Clearcourse Partnership Acqireco Ltd v Manoj Jethwa
| Jurisdiction | England & Wales |
| Judge | Cawson |
| Judgment Date | 11 May 2023 |
| Neutral Citation | [2023] EWHC 1122 (Ch) |
| Docket Number | Claim Nos: IL-2022-000043 and IL-2023-000027 |
| Court | Chancery Division |
[2023] EWHC 1122 (Ch)
HHJ Cawson KC
SITTING AS A JUDGE OF THE HIGH COURT
Claim Nos: IL-2022-000043 and IL-2023-000027
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
The Rolls Building
7 Rolls Buildings
London, EC4A 1NL
Andrew Mitchell KC and Joseph Leech (instructed by Gibson & Co) for the Claimants
James Harris (instructed on a Direct Access basis) for the Defendants (apart from Palmyra Holdings Management Limited)
Madeleine Heal (instructed by Sherrards Solicitors LLP) for the Defendant, Palmyra Holdings Limited
Hearing dates: 27–29 March 2023
Approved Judgment
Remote hand-down: This judgment was handed down remotely at 10.30 am on Thursday 11 May 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
HHJ Cawson KC
HHJ Cawson KC:
Contents
| Introduction | 1 |
| Key background facts | 9 |
| Principles to be applied in respect of summary judgment, strike out and amendment | 28 |
| The First and Second Applications | 33 |
| Introduction | 33 |
| Palmyra's case | 42 |
| CPA's case | 50 |
| Determination of the First and Second Applications | 58 |
| The Third and Fourth Applications | 71 |
| Introduction | 71 |
| QB Counterclaim | 79 |
| The Claimants' case | 91 |
| Mr Jethwa's case | 107 |
| Determination of the Third and Fourth Applications | 118 |
| Overall conclusion in respect of the Third and Fourth Applications | 138 |
| The Fifth Application | 139 |
| Introduction | 139 |
| Directors Loan claim to recover £200,000 | 142 |
| Breach of warranty claim | 176 |
| Deceit claim | 206 |
| Overall conclusion | 234 |
Introduction
This Judgment concerns five applications made within two sets of proceedings that relate to a share purchase agreement dated 30 September 2020 made between the Defendants, Manoj Jethwa (“ Mr Jethwa”), Rekha Jethwa (“ Mrs Jethwa”) and Palmyra Holdings Management Limited (“ Palmyra”) (together “ the Sellers”) (1), and the First Claimant, ClearCourse Partnership AcquireCo Limited (“ CPA”) (2) (“ the SPA”), for the sale to CPA of the entire issued share capital of the Second Claimant, E-Novations (London) Limited (“ ENL”).
The first set of proceedings that I am concerned with was commenced in the Intellectual Property List (Chancery Division) in the Business and Property Courts on 27 May 2022 (Claim no. IL-2022-000043) (“ the Chancery Proceedings”). The Claimants in the Chancery Proceedings are CPA and ENL, and the Defendants are Mr Jethwa, Mrs Jethwa, Palmyra and Epos Direct Europe Limited (“ EDE”). In the Chancery Proceedings, CPA and ENL seek, primarily:
i) A Declaration that ENL is the legal and beneficial owner of certain intellectual property (“ the IP”), said by the Claimants to belong to ENL, but which Mr Jethwa contends belongs to EDE, and further relief consequential upon such declaratory relief;
ii) Repayment of the sum of £200,000 loaned as to £150,000 to Mr and/or Mrs Jethwa and as to £50,000 to Palmyra, but which is now said by CPA and ENL to be repayable as to the entire £200,000 by Mr and Mrs Jethwa;
iii) An enquiry as to damages payable to CPA:
a) For breach of contract on the basis that if the Intellectual Property did not belong to ENL as at the date of the SPA, then Mr and Mrs Jethwa are in breach of a number of warranties given by them in the SPA; and
b) Further, on the basis that Mr Jethwa fraudulently misrepresented that the IP did belong to ENL thereby inducing CPA to enter into the SPA, it being alleged that Mrs Jethwa and Palmyra are also liable for Mr Jethwa's deceit, having authorised him to conduct the relevant negotiations leading to the SPA on their behalf.
The second set of proceedings that I am concerned with was commenced shortly prior to the Chancery Proceedings in the Media and Communications List in the Queen's Bench Division (as it then was) (Claim no. QB-2022-011077) on 1 April 2022 (“ the QB Proceedings”). The Claimants in the QB Proceedings are CPA, Gerald John Gualtieri (“ Mr Gualtieri”) and Joshua Barrett Rowe (“ Mr Rowe”). At the relevant time, Mr Gualtieri was CPA's Chief Executive Officer, and Mr Rowe was CPA's Head of Mergers and Acquisitions. The sole Defendant is Mr Jethwa.
At the commencement of the QB Proceedings, the Claimants sought injunctive relief to restrain Mr Jethwa from disseminating information alleged to be confidential to the Claimants in the QB Proceedings, and damages for breach of confidence. Stacey J granted interlocutory injunctive relief on the Claimants' without notice application on 1 April 2022. This interlocutory injunctive relief was continued by Saini J at an inter partes hearing on 18 May 2022. I am not presently concerned with this aspect of the QB Proceedings, but rather with a counterclaim that Mr Jethwa has brought therein seeking to recover sums alleged to be due from CPA under the SPA by way of earn-out consideration, and alleging that Mr Gualtieri and Mr Rowe procured CPA to act in breach of contract, and conspired together with CPA to cause loss to Mr Jethwa (“ the QB Counterclaim”).
The QB Proceedings were transferred from the King's Bench Division to the Chancery Division by Master Gidden on 21 February 2023, and on transfer have been assigned to the Intellectual Property List, with Claim no. IL-2023-000027.
The five applications presently before me are the following:
i) An application dated 3 August 2022, brought by Palmyra in the Chancery Proceedings seeking an order that the claim therein as against Palmyra be struck out pursuant to CPR 3.4(2)(a) and/or (b), and for reverse summary judgment in its favour against the Claimants therein pursuant to CPR Part 24 (“ the First Application”);
ii) An application dated 17 October 2022, brought by the Claimants in the Chancery Proceedings seeking permission pursuant to CPR 17.1(2)(b) to file and serve Re-Amended Particulars of Claim in the terms of the draft attached to the application (“ the Second Application”). The effect of amendments proposed by the Second Application would be to limit the claim as against Palmyra to one of deceit (on the basis that Palmyra is liable for fraudulent misrepresentations alleged to have been made by Mr Jethwa), and the amendments proposed provide further particulars in relation to this deceit claim;
iii) An application dated 16 September 2022, brought by the Claimants in the QB Proceedings seeking summary judgment pursuant to CPR Part 24 as against Mr Jethwa on the QB Counterclaim and/or an order that the QB Counterclaim be struck out pursuant to CPR 3.4 (“ the Third Application”); and
iv) An application dated 6 December 2022, brought by Mr Jethwa in the QB Proceedings whereby he seeks permission to file and serve a Re-Amended Defence and Counterclaim that would join Palmyra as a Defendant to the Counterclaim, and make certain amendments to the QB Counterclaim as formulated against CPA, Mr Gualtieri and Mr Rowe (“ the Fourth Application”).
v) An application dated 20 September 2022, brought by the Claimants in the Chancery Proceedings whereby they seek summary judgment pursuant to CPR Part 24 in respect of a number of the claims brought therein, and/or to strike out pursuant to CPR 3.4 those parts of the Defence of Mr and Mrs Jethwa that relate to those claims (“ the Fifth Application”). The claims in question are: (a) the claim to recover as against Mr and Mrs Jethwa the £200,000 that had originally been loaned to Mr and Mrs Jethwa and Palmyra, (b) the claim of breach of warranty against Mr and Mrs Jethwa, and (c) the claim of deceit as against Mr and Mrs Jethwa, but not Palmyra. Whilst the evidence in support of the Fifth Application identified other issues for summary determination or dismissal, in the limited time available at the hearing they were not pursued. The Claimants have sought to reserve their position in respect of these issues with a view to restoring them for hearing if appropriate. In seeking summary determination or strike out in respect of the breach of warranty and deceit claims, the Claimants say that they do so on the basis of taking Mr and Mrs Jethwa at their word as expressed in the present proceedings so far as the ownership of the IP is concerned, i.e., on the basis that it does not belong to the Claimants. However, the claim for declaratory relief in respect of the IP to the effect that it belongs to ENL has not been formally abandoned. This is an issue to which I will return.
The parties were agreed that the First and Second Applications should be dealt with together, as should the Third and Fourth Applications, although there was some disagreement as to the order in which I should hear the five applications. In the event, I heard submissions on the First and Second Applications, before hearing submissions on Third and Fourth Applications, and finally hearing submission on the Fifth Application. Given the limited time available, I reserved judgment on all five applications.
Mr Andrew Mitchell KC and Joseph Leech appeared for the Claimants, Mr James Harris appeared for all the Defendants apart from Palmyra, and Ms Madeleine Heal appeared for Palmyra. I am grateful to them all for their helpful written and oral submissions.
Key Background Facts
ENL is a company that has at all relevant times specialised in the sale and supply of sophisticated electronic tills (otherwise known as electronic point-of-sale devices or ‘EPOS’)...
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