IVY Technology Ltd v Barry Martin
| Jurisdiction | England & Wales |
| Judge | Mr Justice Teare,Mr. Justice Teare |
| Judgment Date | 23 January 2020 |
| Neutral Citation | [2020] EWHC 94 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2019-000477 |
| Date | 23 January 2020 |
[2020] EWHC 94 (Comm)
Mr. Justice Teare
Case No: CL-2019-000477
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Dominic Happe (instructed by Malvern Law Limited) for the Claimant
Adam Solomon QC and David Lascelles (instructed by Hill Dickinson LLP) for the Second Defendant
Hearing date: 17 January 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.
The Honourable Mr Justice Teare
This is an application by the Claimant to amend its Particulars of Claim to add additional claims against the Second Defendant, Mr. Bell. The claim relates to a share sale agreement and claims were originally brought against the First Defendant, Mr. Martin, for breach of the agreement and against the Second Defendant, Mr. Bell, for the torts of conspiracy and of inducing that breach. In essence, the Claimant now wishes to allege that the Second Defendant was party to the agreement as the undisclosed or disclosed principal of the First Defendant and so is also liable for the alleged breach of the agreement. The most substantial issue debated was whether that amended plea had a real prospect of success. It was submitted on behalf of the Claimant that it did, so that permission to amend should be granted, and on behalf of the Second Defendant that it did not, so that permission to amend should be refused. In addition certain other points were also debated.
This matter has already been before the court in the context of an application for a Freezing Order. Such an order was granted by Knowles J. ex parte on 29 July 2019 but, so far as concerns the Second Defendant, was set aside on the return date by Mr. Andrew Henshaw QC, as he then was, on 26 September 2019. Whilst Mr. Henshaw QC held that that there was an arguable claim against the Second Defendant in tort, he held that the Claimant had not established the necessary risk of a dissipation such as to justify the continuation of the freezing order.
The underlying claim concerns an agreement dated 4 April 2019 for the sale of shares in 5 companies which comprised an online gambling operation trading as “21Bet”. In essence the Claimant complains of misrepresentations which induced the making of the agreement and of warranties which were broken. Various remedies, including damages and rescission are claimed.
By the amendment for which permission is sought the Claimant wishes to allege that the agreement to sell the shares in 21Bet was made by the First Defendant on his own behalf and on behalf of the Second Defendant so that the latter is also liable to pay damages for breach and to repay sums paid under the agreement.
There is evidence that the shares in the companies comprising the business known as 21Bet were owned as to 50% by the First Defendant and as to 50% by the Second Defendant. Precisely how the shares were held is not, at this early stage in the proceedings, known. A Due Diligence Questionnaire which was answered, I was told, by Mr Martin stated as follows:
“Officially all the relevant entities are owned by Richard Hogg but the true ownership is Mr. B. Martin & Mr. P. Bell 50–50 ownership.”
I was told that Mr. Hogg was the registered owner of the shares in the companies. Mr. Bell himself has said in a witness statement prepared for the return date of the freezing order application:
“I was the beneficial owner of 50% of the shares in the Business alongside Mr. Martin, who managed the business on a day to day basis. I had limited involvement in the management and direction of the Business.”
Notwithstanding this “equal” beneficial ownership of the shares in the companies forming the 21Bet business, Mr. Bell was not named as a party to the share sale agreement. The parties to the agreement were stated to be the Claimant, Ivy, the 5 companies and Mr. Martin who was described as the “Shareholder”. The recitals to the agreement (which were stated by clause 1.2 to be an integral part of the agreement) said in terms that:
“The Shareholder is the beneficial owner of the entire share capital of [4 companies] his shares being held by nominees….
No person other than the Shareholder is entitled to any right in and to [the 4 companies]”
The shares in the fifth company were stated to be held by one of the 4 companies.
There was no evidence as to why Mr. Martin was described as the beneficial owner of the shares when in fact, as is common ground, and was known to the Claimant, the shares were beneficially owned 50/50 by Mr. Martin and Mr. Bell. Also unknown are the details of the agreement between Mr. Bell, Mr. Martin and Mr. Hogg. No written agreement has yet emerged. It may be, as indicated in a Letter of Intent dated 4 January 2019 and issued by another proposed purchaser of the 21Bet business, that there was a “verbal agreement” between those three gentlemen but, if so, the terms of that oral agreement are not in evidence.
The case which the Claimant, Ivy, now wishes to advance is that Mr. Martin entered into the agreement not only on his own behalf but also on behalf of Mr. Bell. In circumstances where Ivy wished to buy the shares in the 5 companies comprising the 21Bet business and where those shares were beneficially owned by Mr. Martin and Mr. Bell that would appear to be a not unrealistic allegation. In order to be able to transfer the full beneficial ownership of the shares to Ivy Mr. Martin would have required the consent of Mr. Bell to the transaction. The identity of Mr. Bell as a 50% beneficial owner had been disclosed by Mr. Martin in response to the due diligence questionnaire and to that extent Mr. Bell was a disclosed principal of Mr. Martin. Thus the circumstances of the case strongly suggest that Ivy was willing to contract with Mr. Martin on the basis that he both acted for himself and for Mr. Bell. Equally, in circumstances where Mr. Bell no doubt required payment for his shares, it is likely that Mr. Martin had authority from Mr. Bell to act on his behalf (and on this application no issue was raised as to there being such agency).
Exclusion of Mr. Bell's liability
However, a person not named as a party to an agreement cannot be sued upon it as a disclosed (or undisclosed) principal if the terms of the agreement expressly or by implication exclude his liability to be sued; see Playboy Club London Ltd. v Banca Nazionale del Lavoro SPA [2018] UKSC 43 at paragraph 12 per Lord Sumption. The question raised by counsel for Mr. Bell is whether the terms of the Agreement in this case exclude expressly or by implication the liability of Mr. Bell to be sued as a disclosed (or undisclosed) principal.
This question can obviously arise in many different contexts; see, for example. Ferryways NV v Associated British Ports [2008] EWHC 225 (Comm), Aspen Underwriting Limited v Credit Europe Bank [2017] EWHC 1094 (Comm) and [2018] EWCA Civ 2590 and Filatona v Navigator [2019] EWHC 173 (Comm). But it is not always easy to answer. Thus, in Kaefer Aislamientos SA v AMS Drilling Mexico [2019] EWCA Civ 10, Green LJ said at paragraph 114:
“…it might be putting the proposition too highly to say that the mere specification of parties in a contract serves to oust the doctrine of undisclosed principal since, if it were true, then every contract with named parties would serve to prevent a finding that there were undisclosed principals which would defeat the principle itself. ……..For my part I do not think that the entire agreement clause in the terms and conditions necessarily serve to exclude altogether the possibility that there might be undisclosed principals. The language used is not wholly unequivocal and the parties could, had they wished, have expressly stated that the parties thereto were the only parties that could sue and/or be sued. But they did not. On the other hand, I do consider that it is a cogent indication that the alleged agents (the first and second defendants) did not intend to act on behalf of an undisclosed third party principal and that this was also the view of the claimant. It is evidence that can go into the mix.”
The reference made by Green LJ to the entire agreement being “evidence that can go into the mix” suggests that the answer to this question is not just a question of construing the contract but is also a question of examining all the circumstances of the case (see also paragraph 113 where Green LJ refers to the express identification of the parties in the relevant agreement being “a (powerful) part of the evidential mix but was not dispositive”).
That being so it seems to me that the court should be wary of deciding this question at this early stage in the proceedings. In circumstances where Mr. Martin and Mr. Bell were 50/50 beneficial owners of the shares and yet the parties contracted on the basis that Mr. Martin was the beneficial owner of all the shares it is likely that there must have been some discussion between the parties as to why the parties were to contract on the basis they did and why this was acceptable to Ivy (who wished to buy all the shares) and to Mr. Bell (who must have wished to be paid for his shares). On this topic there are likely to have been discussions which “crossed the line” as opposed to merely subjective thoughts on either side. Neither Ivy nor Mr. Bell have adduced evidence as to such discussions but it is likely that there were such discussions.
In Elite Property Holdings v Barclays Bank [2019] EWCA Civ 204 Asplin LJ summarised the principles to be applied when considering amendments, at paragraph 41:
“For the...
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