Daniel Stewart & Company Plc v Environmental Waste Controls Plc
| Jurisdiction | England & Wales |
| Judge | Mr Simon Picken |
| Judgment Date | 25 June 2013 |
| Neutral Citation | [2013] EWHC 1763 (QB) |
| Date | 25 June 2013 |
| Court | Queen's Bench Division |
| Docket Number | Case No: HO12X00272 |
[2013] EWHC 1763 (QB)
THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice Strand,
London, WC2A 2LL
Mr Simon Picken QC (sitting as a Deputy Judge of the High Court)
Case No: HO12X00272
Paul Luckhurst (instructed by Swan Turton LLP) for the Claimant.
Benjamin Williams (instructed by Hill Dickinson LLP) for the Defendant.
Hearing dates: 7, 8, 9, 10 and 20 May 2013
APPROVED JUDGMENT
Mr Simon Picken QC:
Introduction
The Claimant, Daniel Stewart & Company PLC ("Daniel Stewart"), is an investment bank which provides corporate finance and broking services. The Defendant, Environmental Waste Controls PLC ("EWC"), is a company which manages waste services.
This is a claim for payment of a so-called 'abort fee', in the sum of £150,000, which Daniel Stewart alleges is due and owing from EWC in respect of EWC's engagement of Daniel Stewart in late December 2010 (the "Engagement Letter") to assist it in listing on the Alternative Investment Market (the "AIM"). Essentially, EWC having ultimately decided, on 22 May 2011, not to proceed with the planned listing, "having regard", so it is said on EWC's behalf by Mr Benjamin Williams in his Opening Skeleton Argument, "to the value of the defendant and the objectives of the defendant's owner, Mr William (Bill) Edwards, of which the claimant was always aware", the issue is whether the abort fee is payable or not.
Daniel Stewart's case is that EWC's liability in respect of the abort fee is straightforward. Daniel Stewart says that if EWC had gone ahead with the listing, it would have earned substantial commission on the sums raised (substantially more than the £150,000 agreed as the abort fee) and, in such circumstances, the parties having agreed that such a fee would be payable in the event that EWC decided not to proceed, EWC came under a liability to make the payment. EWC disputes Daniel Stewart's claim. Its position is that Daniel Stewart is not entitled to payment of the abort fee for two main reasons. First, EWC contends that because by 22 May 2011 Daniel Stewart had (in the language of the relevant contractual provision concerned with the abort fee) completed "the marketing and book build process" and the listing was one which "should not proceed", Daniel Stewart should have agreed that the listing should not go ahead and, therefore, the abort fee is not payable. EWC's position, in the alternative, is that its decision to abort the listing was for reasons connected (or, in the language of what was agreed, not for "reasons unconnected") "to Daniel Stewart or its performance", and so EWC was entitled to abort without incurring liability to pay the abort fee.
In addition to Daniel Stewart's abort fee claim, there are also disputes over the following: a claim in respect of certain legal expenses incurred by Daniel Stewart (specifically, whether disbursements amounting to £699.30 are payable on top of legal fees, and whether Daniel Stewart can recover a further sum by way of VAT on top of the VAT charged by their lawyers, Field Fisher Waterhouse LLP ("FFW"), to Daniel Stewart); a claim in respect of certain monies incurred by Daniel Stewart in carrying out searches on EWC's existing directors (as opposed to other directors who were new to EWC); and Daniel Stewart's reliance in relation to its interest claims on the Late Payment of Commercial Debts (Interest) Act 1998. I shall come on to address these subsidiary matters after, first, considering the abort fee issue.
The abort fee
The events giving rise to the claim
I should start consideration of the abort fee claim by describing the events which have given rise to it. Those events are largely uncontroversial, although there are some disputes on certain matters which I need, if only for completeness, to address. In truth, however, the disputed matters of evidence have only limited, in some cases if any, significance in relation to the issue which I have to decide. That is an issue which really turns on the conclusions I reach on the proper construction of the Engagement Letter and whether any term is to be implied into the Engagement Letter requiring Daniel Stewart to act reasonably in agreeing that the listing "should not proceed" (or, put another way, requiring Daniel Stewart "not unreasonably [to] withhold agreement to the transaction not proceeding", as EWC put it in paragraph 5A of its Amended Defence) in accordance with the third sentence of the abort fee clause. As I explain later, I am not really assisted in relation to these matters by the witness evidence which was put before me. It is nonetheless right that I say something about the witnesses from whom I heard.
The witnesses
There were five witnesses called by Daniel Stewart: Mr Oliver Rigby, now an assistant director at Deloitte but at the relevant times a Director in Daniel Stewart's Corporate Finance Department; Mr James Felix, an Assistant Director in Daniel Stewart's Corporate Finance Department; Mr Richard Nolan, an Equity Research Analyst at Daniel Stewart at the time of the EWC transaction but now Chief Executive Officer of Premier Gold Resources PLC; Mr Paul Shackleton, Head of Corporate Finance at Daniel Stewart; and Mr Martin Lampshire, Daniel Stewart's Head of Corporate Broking. EWC's two witnesses were: Mr Bill Edwards, EWC's Managing Director and majority shareholder; and Mr Geoffrey Griggs, EWC's Chief Financial Officer at the relevant time but no longer, having since left.
I am satisfied that in their evidence before the Court each of the witnesses was giving honest evidence. Although in certain respects, as will appear, I have not felt able to accept the evidence which was given by Mr Griggs and Mr Edwards, preferring that of Daniel Stewart's witnesses, I consider that Mr Griggs and Mr Edwards were not trying in their evidence to mislead but were doing their best to assist the Court with their recollection of events. I do, however, consider that in relation to one aspect, what Mr Williams described in his Closing Submissions as the 'pay them off email sent on 17 May 2011, Mr Griggs and Mr Edwards were not entirely candid in what they were prepared to acknowledge in their evidence, and this did not reflect particularly well on them even though I am clear that it is a matter which has only limited bearing on the issue which I have to decide. I also consider that, in relation to some of the evidence which Mr Griggs and Mr Edwards gave, there was an element of the "litigation wishful thinking" described by Mann J in Tamlura NV v. CMS Cameron McKenna [2009] EWHC 538, [2009] Lloyd's Rep PN 71 at para. [174], in which "regret over what happened has led to a search for those who might be blamed, and has tinted the spectacles through which theevents are now viewed". As Mann J explained, "This does not amount to a deliberately fabricated case, but it does not create a good one either." That said, the "litigation wishful thinking" in the present case was very much tempered by Mr Griggs' and Mr Edwards' acknowledgment, to their considerable credit, that, despite how the case was put in opening, Daniel Stewart had not actually in some way promised EWC a minimum valuation or minimum fundraise. The "litigation wishful thinking" seemed to me really to consist of Mr Griggs and Mr Edwards attributing to Daniel Stewart knowledge concerning Mr Edwards' personal objectives, specifically in relation to the development of a castle project in North Wales, which Daniel Stewart did not have, at least at the time that the Engagement Letter was entered into.
AIM listings
As is well known, and was not controversial, the AIM is an established stock exchange used to list companies which may not be suitable for listing on a larger stock exchange, typically the main London Stock Exchange. As Mr Rigby explained in his first witness statement, a listing on AIM does not necessarily involve selling all of the shares in the company seeking listing in the initial listing. Indeed, the existing owners of the company are not permitted to sell all of their shares but can only sell a proportion as part of what is known as a 'vendor placing'. Typically also the listing will entail the company issuing new shares in order to raise funds for the company to invest in future growth. As Mr Rigby went on to explain, the price at which the company's shares are sold can be extrapolated to give a notional overall value of the company based on the total number of available shares in the company. This is a value which may rise or fall over time as the shares are publicly traded following the listing.
According to Mr Rigby, the process of listing a company on the AIM involves a team of people at an investment bank such as Daniel Stewart, each with different areas of responsibility and expertise. The Corporate Finance team performs a general advisory role in relation to the listing process, working on the structure of the flotation, dealing with due diligence issues, and liaising with the AIM as appropriate. In the EWC project, Mr Rigby, as I say a Director of Daniel Stewart's Corporate Finance Department, acted as the team leader in relation to the transaction, reporting to Mr Shackleton, the head of that department. In addition, a typical listing will also involve input from the Corporate Broking Department, performing a sales role which involves marketing the shares to potential investors. That department, again as explained by Mr Rigby, will arrange and attend pitches to potential investors and generally will liaise with potential investors in order, as Mr Rigby put it, to drum up interest and obtain feedback so that the level of interest can be gauged and a book built of investors which have a firm intention of investing. In addition to the Corporate...
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