Mybarrister Ltd v Guy Charles Cornelius Hewetson and Others (Respondents/Defendants) Ronald Meyer Dekoven (Applicant/Third Party)
| Jurisdiction | England & Wales |
| Judge | Mr Daniel Alexander |
| Judgment Date | 19 October 2017 |
| Neutral Citation | [2017] EWHC 2624 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No HC 2016-002511 |
| Date | 19 October 2017 |
[2017] EWHC 2624 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
Rolls Building
Fetter Lane, London EC4
Mr Daniel Alexander QC
Sitting as a Deputy Judge of the Chancery Division
Claim No HC 2016-002511
and
Mr Tom Smith QC and Mr Matthew Abraham (instructed by Reed Smith LLP) for the Applicant /Third Party
Mr John McLinden QC (instructed by Keystone Law) for the Respondents/ Defendants
Hearing date: 26 June 2017
Mr Daniel Alexander QC
Introduction
By an application notice dated 10 March 2017, the third party to these proceedings Ronald Meyer DeKoven ("Mr DeKoven") applies to strike out the Particulars of Additional Claim dated 8 December 2016. That claim is said to disclose no reasonable cause of action, alternatively that it should be decided against the Defendants by summary judgment under CPR 24.2(a) on the basis that the claim stands no real prospects of success and that there is no other compelling reason for the case to be disposed of at a trial.
Evidence was served by both parties in the form of witness statements from Mr Nicholas Brocklesby of Reed Smith (solicitors for the Claimant and the third party, Mr De Koven) and Mr Matthew Reach of Keystone Law (solicitor for the Defendants).
The application arises in a claim originally advanced by the Claimant for a negative declaration of non-liability and entitlement to terminate certain contractual relations with the Defendants which is now, by counterclaim, in substance largely a claim for alleged breach of them as said to have been varied.
Background
The Claimant, MyBarrister Limited is a company incorporated in England and Wales. Although it has been operating since April 2013, it is fairly described as a "start-up" company. The Claimant was set up by Mr DeKoven, who is a practicing barrister and who previously had a career as a lawyer in the United States. The idea behind the establishment of the Claimant was to allow clients seeking legal services to search for barristers via an online access portal at www.myBarrister.co.uk.
The Defendants were at all material times partners in a recruitment business, Hewetson Shah, which focuses on the legal sector. Following discussions between the parties, an arrangement was made that the Defendants would be engaged by the Claimant to assist in attracting barristers to become members of "MyBarrister" in exchange for commission. These arrangements are referred to as the Recruitment Arrangements. These led to a formal written agreement ("the Recruitment Agreement") dated 16 April 2014, which is said by the Claimant exclusively to govern the terms of the parties' relationship.
The relevant terms of the Recruitment Agreement
The central terms of the Recruitment Agreement provided for the Defendants to recruit barristers ("Barrister Members" as defined) and that they would be paid by way of shares in the capital of the Claimant upon reaching certain recruitment targets defined by reference to two periods. Clause 2 is the most relevant provision. It states:
"2. Payment of Commission
2.1 The Company [i.e. the Claimant] agrees that it shall as soon as reasonably possible after the [sic]
(a) the First Commission Target being achieved (and in any event within 30 Business Days of the First Commission Target being achieved), pay to the Partners the Commission set out in Part 1 of the Schedule; and
(b) the Second Commission Target being achieved (and in any event within 30 Business Days of Second Commission Target being achieved), pay to the Partners the Commission set out in Part 2 of the Schedule".
The Schedule set out for each of the Partners (i.e. each of the Defendants) how many Ordinary Shares were to be allotted to them respectively when the targets were reached. The First Defendant was to receive twice as many shares as the other Defendants in each period. The First Commission Target was 1000 new Barrister Members. The Second Commission Target was an additional 1500 Barrister Members. These were, as things turned out, demanding targets.
Clause 2.2 provided that the Partners shall each use their best endeavours to encourage barristers and others to participate in the fundraising of the Company. Clause 2.3 provided for a lapse of rights in the event that the Commission Targets were not reached. Clause 2.4 related to the allotment of shares and provided:
"Subject to achieving the relevant Target, the Company shall take all steps to
(a) authorize allotment of the Commission Shares set out in the relevant part [of] the Schedule free of all pre-emption rights; and
(b) allot the Commission Shares in the amounts set out in the relevant part of the Schedule credited as fully paid, enter the name of the relevant Partner…in the register of members of the Company as the holder of those shares ad deliver to the relevant Partner their relevant share certificates."
Clause 4 provided for rights attaching to the Commission Shares whereby the Company agreed that the shares would convey certain rights, including rights to dividends and other distributions.
Recruitment falls short
According to the Defence and Counterclaim, the Defendants duly sought to recruit barristers. They say (and that is borne out by the evidence on this application) that recruitment of Barrister Members was more difficult than the Claimant had envisaged. The First Commission Target, which under the agreement was to be achieved in the first year from the date of the Recruitment Agreement, running to 15 April 2015, was not nearly met. The Defendants say that they told the Claimant that the commission targets were not realistic or achievable and that, in the circumstances, it did not make sense to keep going and attempt to recruit Barrister Members beyond the end of the First Commission Period. Whatever the position in detail, that led to a critical meeting or pair of meetings at which the obligations in issue in this case are said to have arisen.
The alleged Revised Recruitment Agreement
A strategy meeting was called on 21 April 2015. A number of topics were discussed including, in particular, the perception that in order to raise more investment in the Claimant, it would be necessary for the Claimant to have approximately 300 Barrister Members. The Defendants contend that it was said at a post-strategy meeting afterwards that, if they helped the Claimant to achieve that number by a given date in 2015, the Claimant would honour the requirements as to Commission due under the Recruitment Agreement, even though the original targets were not reached and that this gave rise to a Revised Recruitment Agreement of which breach is alleged by the Counterclaim by way of failure to pay the Commission. As to the formation of that alleged Revised Recruitment Agreement, the Defence and Counterclaim outlines the background and then states in paragraphs 29–30:
"At the post strategy meeting the Claimant proposed a revision to the Recruitment Agreement that would satisfy the needs of both parties by:
29.1 offering the Defendants the 5% of its share capital referred to in the Recruitment Agreement if they assisted the Claimant to achieve the revised Barrister Member target by September 2015; and
29.2 assuring them that it would not terminate the Recruitment Agreement because the requisite number of Barrister Members had not been recruited as per the original terms of the Recruitment Agreement.
30. The Defendants accepted the Claimant's offer of the Revised Recruitment Agreement, induced by the Third Party's conduct referred to hereinafter."
There is a fundamental dispute as to whether any such Revised Recruitment Agreement was made and those paragraphs have been denied by the Claimant. The Claimant additionally pleads that, had there been such a variation of the Recruitment Agreement it would have been recorded in writing "particularly in circumstances where the parties were commercial parties that had negotiated and entered into a formal agreement drafted by lawyers" and that it would fail anyway for want of consideration. Moreover, the alleged terms of the variation are disputed on the basis that any such variation would have been to require there to be at least 300 "active" Barrister Members registered on the website by 1 September 2015 or the date by which that target had to be achieved. It is also said that by 15 September 2015, when the Claimant contends that it terminated the Recruitment Agreement, there were only 282 Barrister Members active of the Claimant's web-site.
The Additional Claim
I now turn to the heart of this dispute relating to the Additional Claim.
As well as alleging that the Recruitment Agreement was varied, the Defendants contend that, at the same time, Mr DeKoven agreed/assumed a primary personal obligation to the Defendants to pay or arrange for the commission to be paid which was distinct from the obligations of the Claimant to them and that he did so in order to further his personal interests in preserving or increasing the value of his shareholding in the Claimant knowing that he would cause the Defendants to act to their financial detriment. It is said that it was only on that basis that the Defendants entered into the Revised Recruitment Agreement with the Claimant whose obligations they sought to perform. The Defendants contend that it is arguable both as a matter of pleading and as a matter of fact that a collateral contract arose, which gave rise to personal liability additional to the liability of the Claimant under the terms of the Revised Recruitment Agreement.
Mr DeKoven, in response, contends that he did not assume any...
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