Jones v Sherwood Computer Services Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE BALCOMBE |
| Judgment Date | 07 December 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J1207-1 |
| Docket Number | 89/1148 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 December 1989 |
[1989] EWCA Civ J1207-1
Lord Justice Dillon
and
Lord Justice Balcombe
89/1148
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(His Honour Judge Hague, sitting as a deputy Judge of the High Court)
Royal Courts of Justice
MR. NICHOLAS UNDERHILL (instructed by Messrs Phillips & Buck, Cardiff) appeared on behalf of the Respondents Plaintiffs.
MR. MARK HOWARD (instructed by Messrs Norton Rose) appeared on behalf of the Appellant/Defendants.
This is an appeal by the defendants in the action, against a decision of His Honour Judge Hague, Q.C. sitting as a Judge of the High Court in the Chancery Division, whereby the judge dismissed a summons by the defendants to strike out certain parts of the statement of claim endorsed on the writ. The judge gave the defendants leave to appeal.
The defendants' summons had been issued on 14th September 1988. It seeks an order that paragraphs 4, 5 and 8 to 13, and paragraphs 1 to 5 of the prayer for relief in the statement of claim be struck out and/or the causes of action pleaded therein be stayed "on the grounds that they disclose no reasonable cause of action against the defendants and/or are frivolous and vexatious and/or an abuse of the process and/or because the court has no jurisdiction in respect of these matters".
What this rather comprehensive verbiage comes down to, when applied to the circumstances of this case, is that the plaintiffs and the defendants agreed by contract that certain matters arising in relation to their contract should be determined by an expert whose determination should be conclusive and final and binding for all purposes; the plaintiffs now claim to set aside the expert's report and to have the matters in issue decided by the court, but the defendants say that the plaintiffs cannot do that because the matters in issue are within the reference to the expert and the plaintiffs are, under the contract, bound by the expert's report. That in such circumstances a striking out application can be the appropriate course is shown by the decision of this court in Campbell v. Edwards [1976] 1 WLR 403.
The contract in question between the plaintiffs and the defendants is a sale agreement dated 13th February 1987 whereby the defendants undertook to offer to acquire the entire share capital of a company called Corporate Technology Group Ltd. ("the Company") on the terms of an agreed Offer Document and the plaintiffs, who were substantial shareholders in the company, agreed with the defendants that they would accept that offer in respect of their own shareholdings. The company was the parent company of two operating subsidiaries, L.G. Software Ltd. and CTG Software Ltd. The consideration under the Offer Document for the acquisition of the ordinary shares in the company was the issue of a specified number of new shares in the defendants, referred to as Sherwood Shares, for each ordinary share in the company but in addition there was provision in the Offer Document for such further consideration as might become payable in accordance with the provisions of Appendix 1.
Appendix 1 provided by paragraphs 1 to 4 and 7 as follows:
"1. The further consideration under the Ordinary Offer shall be: For each CTG Ordinary share One new Sherwood share
for each whole amount of £35,000 (but not part thereof) by which the amount of the Sales (as determined in accordance with this Appendix) exceeds £2,720,000 provided always that in no circumstances shall the further consideration in respect of each CTG Ordinary share exceed 18 new Sherwood shares.
2. Sherwood shall as soon as practicable after 30th November 1987 and in any event not later than 1st February 1988 cause to be prepared a statement showing the combined software sales of L.G. Software Limited and CTG-Software Limited for the period of 12 months ending 30th November 1987 ("Sales"). For the purposes of the said statement:
(a) Sales shall mean sales to any person, firm or company other than a member of the CTG Group (a "customer") of software products comprised in the current and planned product range (on display as set out in paragraph 5 of Appendix VI) and of related services (including without prejudice to the generality of the foregoing sales of bespoke software and upgrades, manuals and all income derived from the Customer Services Division) provided that the bespoke element of software sales shall be included only to the extent of 50 per cent thereof;
(b) a sale shall be counted only if a customer shall during the relevant period have entered into a binding contract in relation to a relevant product or service (which shall include but not be limited to contracts additional or supplemental to contracts existing at the date hereof); and
(c) there shall be excluded from Sales licence and maintenance fees and sales of hardware and there shall also be deducted from the amount of Sales any commissions, licence fees, royalties or similar amounts payable by any company in the CTG Group to third parties.
3. The said statement, when prepared, shall be reviewed by Peat, Marwick, Mitchell & Co. (on behalf of Sherwood) and Deloitte Haskins & Sells (on behalf of accepting shareholders under the Ordinary Offer) (together "the Accountants") who shall:
(a) jointly approve such statement as prepared by Sherwood: or
(b) make such adjustments thereto as they may jointly agree
and shall deliver a copy of such statement, as approved or adjusted, to Sherwood.
Sherwood shall provide to the Accountants such access to the working papers from which the said statement is derived as they shall require.
4. If the Accountants are unable either to approve the statement as prepared or to agree the adjustments be made thereto, the matter shall be referred to an independent chartered accountant or firm of chartered accountants "(the Expert") to be agreed between the Accountants or, failing agreement, to be nominated by the President for the time being of the Institute of Chartered Accountants in England and Wales, who shall be instructed to determine the amount of the Sales and to provide a report stating such amount to Sherwood within the shortest practicable time. Sherwood shall procure to be provided to the Expert all such information as may reasonably be required by him to enable him to deter mine the amount of the Sales and provide his report as aforesaid.
7. The Accountants and the Expert (if any) shall act as experts and not as arbitrators and their or his determination shall be conclusive and final and binding for all purposes."
What happened under that appendix was that a statement was prepared by the defendants purporting to show the sales for the purposes of paragraph 2, but the accountants, Messrs Peats and Messrs Deloittes, were unable to reach an agreement under paragraph 3, since there were two categories of transaction which Messrs Deloittes thought should be included as "Sales" and Messrs Peats thought should not be included. Everything else, including the amounts of the figures in respect of the disputed transactions, was agreed.
Consequently Messrs Peats and Messrs Deloittes jointly appointed Messrs Coopers & Lybrands to be "the Expert" under paragraph 4. Messrs Coopers' terms of reference are set out in a letter of 15th April 1988 from Messrs Coopers to the defendants, which provides as far as material as follows:
" CORPORATE TECHNOLOGY GROUP PLC
1. We have been aksed by Peat Marwick McLintock and Deloitte Haskins & Sells to act as independent experts to determine the combined software sales of LG Software Limited and CTG-Software Limited for the 12 months ended 30 November 1987, in accordance with schedule 5 to an agreement dated 13th February 1987 relating to the acquisition of Corporate Technology Group plc. We are writing to set out the work we understand is required.
2. In the opinion of Peat Marwick McLintock (acting on behalf of Sherwood Computer Services plc) the turnover, as defined in the agreement for the relevant period, is £2,527,135. In the opinion of Deloitte Haskins & Sells (acting on behalf of former share holders of Corporate Technology Group plc) the turn over, as defined in the agreement for the relevant period, is £3,065,810. The only difference between the opinions of the two firms of accountants are as follows:
(a) Peat Marwick McLintock believe sales should exclude and Deloitte Haskins & Sells believe that sales should include turnover relating to Community Charges net of royalties due to Lychgate amounting to £3 56,525;
(b) Peat Marwick McLintock believe sales should exclude and Deloitte Haskins & Sells believe that sales should include turnover relating to contracts containing cancellation clauses (including two contracts relating to Community Charges) amounting to £182,150.
3. You require us to investigate the areas of difference described above but not to review the areas where there is agreement between the two accountants. This will involve reviewing the available evidence at Corporate Technology Group plc, discussing the matter with present (and if necessary former) employees of that company and its subsidiaries and discussing the matter with and examining the working papers of Peat Marwick McLintock and Deloitte Haskins & Sells relating to this matter. If necessary we may seek independent legal advice but we would inform you of this beforehand. At the conclusion of our work we are required to provide a report stating the amount of sales as defined in the agreement for the relevant...
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