Josette Ann Prevost v Timothy Edward McCarthy
| Jurisdiction | England & Wales |
| Judge | Master McQuail |
| Judgment Date | 06 April 2023 |
| Neutral Citation | [2023] EWHC 824 (Ch) |
| Docket Number | Case No: BL-2022-000158 |
| Court | Chancery Division |
[2023] EWHC 824 (Ch)
Master McQuail
Case No: BL-2022-000158
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Thomas Graham (instructed by Geoffrey Leaver Solicitors LLP) for the Claimants
Mr Matthew Weaver KC (instructed by Wedlake Bell) for the Defendant
Hearing date: 3 March 2023
Approved Judgment
This judgment will be handed down remotely by circulation to the parties' representatives by email. The date and time for hand-down is deemed to be 9.30 am on 6 April 2023
Background
The dispute between the parties concerns the sale of the claimants' 100 shares ( the Shares) in Rainham Industrial Services Limited ( the Company) to the defendant or to the defendant and others.
The claimants are wife and husband. The second claimant and the defendant were friends for many years. The Shares were purchased in 2005 in the name of the first claimant for £500,000. By 2014 they were registered in the joint names of the claimants. From 2005 to 2015 the claimants' evidence is that they were paid monthly dividend income of £3,000 rising to £5,000.
The claimants commenced the proceedings by claim form dated 26 January 2022 and served particulars of claim dated 7 March 2022. By the original particulars of claim the claimants pleaded that the Shares were sold to the defendant pursuant to a share purchase agreement signed in 2015 but not dated ( the 2015 SPA). The claim was brought to recover the balance of the purchase price said to be outstanding pursuant to the 2015 SPA, giving credit for sums totalling £99,500 already paid to the claimants.
The 2015 SPA provided that the defendant would purchase the Shares for the sum of £800,000 to be satisfied by (i) setting off a loan of £131,463.16 due from the second claimant to the Company, (ii) 26 monthly instalments of £25,000 and (iii) a final balancing payment of £18,536.84 on 31 October 2017. So the total payment that might be anticipated by the claimants was some £668,000. The 2015 SPA was signed by the defendant and by the claimants, but it was not signed before witnesses and is not dated (the agreed instalment pattern suggests signature occurred in about August 2015). There is no evidence that stock transfer forms or any other ancillary documents were completed in respect of the 2015 SPA, which the claimants say is the fault of the defendant.
The defendant's position as set out in his Defence is that the Shares were sold pursuant to a share purchase agreement signed in 2016 but not dated ( the 2016 SPA) which, superseded and extinguished any previous agreement. He says that there is no sum owed to the claimants. The defence asserts that the 2015 SPA was conditional on a takeover of the Company which never took place and that completion of the 2015 SPA also never took place. It also denies that payments made to the claimants were made pursuant to the 2015 SPA, since the payments were made by the Company not the defendant and were recorded as loans from the Company to the claimants, were payments made at the request of the claimants on account of sums which might become due under the 2015 SPA but were repayable if it did not complete.
The 2016 SPA provided that the defendant and the other nine shareholders in the Company would purchase the Shares in consideration of the assumption by the purchasers of the second claimant's debt of £268,963.16 to the Company, in amounts pro rata to the numbers of shares each buyer was to acquire. The execution of the 2016 SPA is contested, but the signature pages make apparent that it was intended to be signed and witnessed as a deed by each party. In addition, ten stock transfer forms dated 30 September 2016 would appear to have been signed by the claimants transferring the numbers of shares listed in the 2016 SPA to each purchaser.
Deputy Master Arkush made a consent order giving the claimants permission to amend their particulars of claim on 21 July 2022. The claimants' revised position as set out in the amended particulars of claim ( APOC) was that there was an oral agreement before the date of the 2015 SPA ( the Oral Agreement) for the sale and purchase of the Shares and, to the extent that the 2015 SPA was not a concluded contract, the Oral Agreement remained enforceable. The APOC pleaded a further oral agreement that pending payment in full for the shares the claimants would receive a monthly dividend of £5,000 and asserted that, of the payments received by the Claimants, £25,000 were dividends and not payments of instalments of the claimed price, so that the credit to be given reduces to £74,500 The APOC claimed that the Oral Agreement or the 2015 SPA was effective to transfer the claimants' beneficial interest in the Shares to the defendant so that specific performance would be available.
The APOC disputes the validity of the 2016 SPA and pleads that it should be rescinded for misrepresentation or be void or voidable for mistake on the grounds that:
(i) the Claimants are unaware of having signed it;
(ii) if they did so they must have been tricked by a misrepresentation, the most likely explanation being that the defendant falsely told the second claimant the documents related to the 2015 SPA;
(iii) such misrepresentation was either fraudulent because the defendant must have known it was untrue because there was already a binding 2015 contract or was reckless to its truth or was negligent
(iv) the claimants relied on the representation;
or
(v) it was made under a mistake of fact because the claimants had already transferred their beneficial interest by the Oral Agreement or 2015 SPA.
The amended defence was dated 25 August 2022. It denies any binding Oral Agreement and denies any agreement that pending full payment for the purchase of the Shares the Company would continue to pay dividends to the claimants and denies that there was any consideration for such an agreement.
The amended defence goes on to deny any transfer of the beneficial interest in the Shares to the defendant by anything that occurred in 2015 and relies upon the terms of the 2016 Agreement as extinguishing or superseding any 2015 Agreement and as including the claimants' own warranty that they were the legal and beneficial owners of the shares so that they are estopped from denying that. The amended defence complains that the plea of misrepresentation or mistake is embarrassing for lack of particularity and liable to be struck out as a plea of misrepresentation is not consistent with a plea of being unaware of having entered the 2016 SPA and provides further particulars of that position.
The Applications
By application notice dated 10 November 2022 ( the Defendant's Application), the defendant applied for an order dismissing or striking out these proceedings on the basis that they have no real prospect of success and/or they disclose no reasonable grounds for bringing the claim, pursuant to CPR 24 and/or 3.4(2)(a).
The Defendant's Application is supported by the information at section 10 of the application notice, the witness statements of the defendant dated 10 November 2022, and 26 February 2023 and the witness statements of Andrew Wrate dated 29 June 2022 and William Gilbert dated 27 June 2022
The claimants oppose the Defendant's Application and rely on the witness statements of the first claimant dated 20 February 2023, the second claimant dated 17 February 2023, Flynn Don Prevost ( Flynn Junior) dated 20 February 2023 and Jill McCarthy dated 23 January 2023.
By cross-application dated 20 February 2023 ( the Claimants' Application), the claimants seek permission to re-amend the APOC and to amend the reply. The Claimants' Application is supported by the same evidence as the claimants rely upon in opposition to the Defendant's Application.
The Proposed Amendments in Summary
Paragraph 11(7) of the proposed re-amended particulars of claim ( RAPOC) pleads that there was no consideration for the 2016 SPA. Paragraph 11(8) pleads the lack of consideration as a ground of mistake alternatively as a ground rendering the 2016 SPA void or unenforceable.
Paragraph 11(9) of the proposed RAPOC pleads that the 2016 SPA was procured by undue influence and is therefore voidable.
Paragraphs 14(1) and 14(2) of the proposed amended reply deny that the 2016 SPA was concluded, on the basis that it was not signed by all the buyers and therefore could not take effect as a deed according to its terms and deny there was any intention for it to have contractual effect if it did not take effect as a deed.
Paragraphs 14(3) and 14(4) of the proposed amended reply deny that the 2016 SPA was completed, because it was not dated and because the novation agreements referred to in it were never executed or delivered.
Paragraph 14(5) of the proposed amended reply pleads that the 2016 SPA was unenforceable or void for want of consideration in terms that mirror the amendment at paragraph 11(7) of the proposed RAPOC
Paragraph 16 of the proposed amended reply pleads that the wording of clause 9 of the 2016 SPA was ineffective to supersede the 2015 arrangements because such effect was confined to previous arrangements between “them”, which it is said must, without the additional words “or any of them”, refer to arrangements between all of the parties to the 2016 SPA.
The Defendant's Position on the Amendments
The defendant does not oppose the claimants' application to amend subject to the following:
(i) he says it would be premature for permission to be given to amend the reply, before the defence is re-amended;
(ii) any order granting permission to amend the APOC should provide for the...
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