Mark Kenneth Baber Saxby v UDG Healthcare (UK) Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | Klein |
| Judgment Date | 05 February 2021 |
| Neutral Citation | [2021] EWHC 144 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: C30LS701 |
| Date | 05 February 2021 |
[2021] EWHC 144 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
BUSINESS LIST (ChD)
Leeds Combined Court Centre,
The Courthouse,
1 Oxford Row,
Leeds, LS1 3BG.
HIS HONOUR JUDGE Klein SITTING AS A JUDGE OF THE HIGH COURT
Claim No: C30LS701
Gregory Pipe (instructed by Clarion Solicitors Ltd.) for the Claimants
James Potts QC and Seamus Woods (instructed by Pinsent Masons LLP) for the Defendant
Hearing dates: 5–6, 9–13, 16–20, 23–27, 30 November and 4 December 2020
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HIS HONOUR JUDGE Klein
HH Judge
This is the judgment following a trial of “all issues in the action except the amount of any damages and interest payable to the Claimants for which the Defendant may be liable” 1 in a claim arising out of the sale, by the Claimants (and the other shareholders) to the Defendant, on 30 November 2010 2, of their shareholdings in World Events Group Ltd. (“WEG”). Broadly, the Claimants contend that they were induced to sell by actionable misrepresentations, some of which were fraudulent, made at a meeting on 12 November 2010 (“the Meeting”), principally by Graham McIntosh, which also amounted to negligent misstatements.
Companies and corporate structures
The corporate structure of the group of which the Defendant is a part (“the UD group”) is complex and made more so because some company names have changed since 2010. During the course of the trial, except when it was necessary to do so, the parties did not make bright line distinctions between the different companies (or divisions within those companies). In fact, different speakers referred to the same entities by different names and, at times, I had to check which company or division was being talked about. All this is hardly surprising. As I shall explain, in the management of the group's companies (so far as that is relevant in the present case) and in events leading to the share sale and purchase agreement (“the SPA”), there were few distinct corporate boundaries.
It is necessary, however, to briefly sketch the formal corporate structures of the UD group and of WEG prior to the sale, referring to company names as they were in 2010. It is also helpful to identify, at the same time, some of the key individuals within those companies in 2010; noting, however, that some individuals had a formal role in more than one company in the UD group and that some of them appear to have had informal roles in other companies within the group.
WEG
WEG provided events management services; principally to pharmaceutical companies. It operated principally in the UK, from Cleckheaton in West Yorkshire, and in the US (through its US subsidiary), from Lambertville in New Jersey, but it also had offices, and provided services, elsewhere in the world.
Graham Keene was WEG's chairman and its majority shareholder. He owned or controlled about 90% of the voting shares and about 60% of the equity at the time of the transaction. 3 His shareholding allowed him to control board appointments and to
Martin Parry was WEG's managing director. He disposed of 400,000 D shares on the sale.
Andrew Winterburn was WEG's European director. He disposed of 500,000 A, B and D shares on the sale. 5
Mark Saxby was WEG's group sales and marketing director. He disposed of 220,000 D shares on the sale.
Gary Dickinson was chief executive officer of World Events Inc (“WEI”), WEG's US subsidiary. He disposed of 170,000 D shares on the sale.
Jeremy Wilson was WEG's finance director. He disposed of 120,000 D shares on the sale. 6
One-half of Mr Parry's shareholding, Mr Winterburn's D shares, 200,000 of Mr Saxby's D shares, at least 150,000 of Mr Dickinson's shares and all of Mr Wilson's shareholding were allotted to them under share option agreements which made the shares available to them on Mr Keene's disposal of a controlling interest in WEG (i.e. the sale).
The UD group
United Drug plc (“the Plc”) was the group's ultimate parent company. Its chief executive officer was Liam FitzGerald and its board included Christopher Corbin and Barry McGrane (the Plc's finance director). Employed by the Plc at the time was, and still employed by it is, Liam Logue, who is now (and was at the time) the Plc's corporate development director.
The Defendant is a direct subsidiary of the Plc. The other companies in the UD group to which I refer are either direct or indirect subsidiaries of either the Plc or the Defendant.
The UD group operated within divisions; mainly health-related, including the Contract Sales and Marketing Services division (“the CSMS division”).
The CSMS divisional finance director was Steven Bainbridge and its US finance director was Neville Acaster.
Ashfield In2Focus Ltd. (“AI2F”), based in Ashby-de-la-Zouch in Leicestershire, was a CSMS divisional company. Mr Corbin was its managing director, Steven Mate was a management account employed by it and its in-house solicitor was Clare Bates.
Universal Procon Inc. (“UPUS”) was a US-based CSMS divisional company. It itself was made up of two divisions; a logistics division (“US Logistics”), which provided services from the US similar to those provided by WEG (i.e. mainly healthcare events management services), and a creative services division (“US UCS”) which included a business referred to at the trial as TMM. UPUS also had a subsidiary company; GET US LLC (“Get”), which provided what have been described as destination management services (e.g. dinner reservations for participants at events organised by US Logistics). Adam Gordon was UPUS' president. US Logistics, at least, operated principally from an office in Ivyland in Pennsylvania (which is close to Lambertville), but it also had a subsidiary office in Indianapolis in Indiana which serviced a principal client; Eli Lilly & Co. (“Lilly”).
Universal Procon Ltd. (“UPUK”) was also a CSMS divisional company. It was also itself made up of two divisions; a logistics division (“UK Logistics”), which provided services from the UK similar to those provided by WEG and US Logistics, and a creative services division (“UK UCS”). It too had a subsidiary company; Air Travelworld Ltd. Graham McIntosh was UPUK's managing director. UK Logistics, at least, operated from an office in Yeadon in West Yorkshire (close to Cleckheaton).
Mr McIntosh and Mr Corbin had worked closely for many years. They had worked together in what was (or became) AI2F before it was disposed of to the UD group. Prior to that disposal, Mr Corbin had held a controlling interest in AI2F. Although Mr Gordon was UPUS' president and Mr McIntosh was UPUK's managing director, as Mr Gordon confirmed, he reported to Mr McIntosh. 7 8
The SPA
As I have indicated, by an SPA, entered into on 30 November 2010, the shareholders in WEG sold their shares to the Defendant. The SPA is complex and, for the purposes of this judgment, it is enough to give a broad brush summary of its relevant provisions; as the parties did at the trial.
The consideration payable under the SPA to the shareholders (“the sellers”) was in three parts; namely (i) initial consideration of about £13.05 million, (ii) £300,000 which was retained to meet any breach of sellers' warranty claims and (iii) contingent deferred consideration (“contingent consideration”).
The sellers were entitled to contingent consideration if, during “the Earn-Out Period”, “the Relevant Profits” exceeded £11.4 million.
For each £1 the Relevant Profits exceeded £11.4 million up to and including £14.1 million, the sellers would be entitled to receive £1 contingent consideration. So, if the Relevant Profits in the Earn Out Period were £14.1 million, the sellers would be entitled to receive £2.7 million contingent consideration.
For £1 the Relevant Profits exceeded £14.1 million, the sellers would be entitled to receive an additional £0.50 contingent consideration, up to a maximum (for the sellers combined) of £750,000 (described as an “upside” at the trial).
The Earn-Out Period was a period of 37 months, beginning on 30 November 2010 and ending on 31 December 2013.
If the Relevant Profits in the financial (13 month) period ending on 31 December 2011 (“Year 1”) exceeded £4.4 million, the sellers would be entitled to an advance payment of £900,000 (one third of £2.7 million) and, if also the Relevant Profits in the financial (12 month) period ending on 31 December 2012 (“Year 2”) exceeded £4.7 million, the sellers would be entitled to a further advance payment of £900,000. The advance payments were subject to a claw-back provision in the event that the Relevant Profits in the Earn Out Period did not exceed £14.1 million.
The Relevant Profits were the profits, in fact the combined Earnings before Interest and Taxation (“EBIT”), 9 in the Earn Out Period of WEG (including WEI) and UniversalProcon. It was expected, or hoped, by the key individuals, that the combined EBIT of WEG and UniversalProcon during the Earn Out Period would be enhanced by what were described at the trial as “synergy savings”, achieved following the combination of WEG and UniversalProcon.
Broadly, therefore, for the Claimants to receive their proportion of £2.7 million...
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