Richard Lord v Maven Wealth Group Ltd
| Jurisdiction | England & Wales |
| Judge | Keyser |
| Judgment Date | 24 September 2021 |
| Neutral Citation | [2021] EWHC 2544 (Comm) |
| Docket Number | Case No: CC-2021-CDF-000003 |
| Year | 2021 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 2544 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN WALES
CIRCUIT COMMERCIAL COURT (QBD)
Cardiff Civil Justice Centre
2 Park Street, Cardiff, CF10 1ET
HIS HONOUR JUDGE Keyser QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CC-2021-CDF-000003
Hugh Sims QC and James Hannant (instructed by Harrison Clark Rickerbys Limited) for the Claimants
Henry King QC (instructed by Squire Patton Boggs (UK) LLP) for the Defendants
Hearing date: 15 September 2021
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.
HIS HONOUR JUDGE Keyser QC
JUDGE Keyser QC:
This is my judgment upon issues concerning the proper interpretation of the Articles of Association of the first defendant, Maven Wealth Group Limited (“MWGL”). The issues are raised by a Part 8 claim commenced by the claimants, Mr Richard Lord and Mr Ian Davies, on 20 May 2021. In accordance with the agreement of the parties, by an order dated 29 May 2021 I directed that the issues concerning the interpretation of the Articles of Association and all related declaratory and injunctive relief be tried and that the remaining issues in the case be stayed with liberty to restore.
I am grateful to Mr Sims QC and Mr Hannant, counsel for the claimants, and to Mr King QC, counsel for the defendants, for their helpful written and oral submissions.
The Background
MWGL was incorporated on 30 June 2016 and is engaged in the business of providing financial advisory services. The current directors of the company are the second, third, fourth and fifth defendants (together, “the Director Defendants”). The majority shareholder in MWGL is the sixth defendant, Independent Wealth Planners UK Limited (“IWP”). MWGL is the sole shareholder in Maven Wealth Management Limited (“MWML”).
The claimants are minority shareholders in MWGL. Formerly, they were majority shareholders in MWGL and directors both of MWGL and of MWML; they were also employees of MWML. By a Share Purchase Agreement dated 1 August 2019 they sold their A and C ordinary shares respectively in MWGL to IWP, retaining only their B ordinary shares (“B shares”). However, they remained directors of MWGL and MWML and employees of MWML.
Two other documents were executed on the same date as the Share Purchase Agreement: (1) new Articles of Association of MWGL (“the Articles”); (2) a Call Option and Shareholders Agreement (“COSA”), which was made between IWP as “the Buyer”, the claimants and one other person (the fourth defendant) as “the Sellers” and MWGL as “the Company”. On 28 January 2020 the Articles were amended by unanimous agreement of the members, and a Deed of Variation was executed in respect of COSA. Further references in this judgment will be to the texts of the Articles and of COSA as amended.
On 3 April 2020 the claimants were removed as directors of MWGL and MWML and were suspended from their employment with MWML. On 18 June 2020 they were dismissed from that employment on the grounds of gross misconduct. The lawfulness of those dismissals is disputed and is currently the subject of claims for unfair dismissal before the Employment Tribunal.
It is common ground between the parties: (1) that the dismissal of the claimants from their employment with MWML, whether lawful or not, constituted a “Transfer Event” for the purposes of the Articles of MWGL; (2) that, by giving notice to MWGL that it was treating their dismissal as a Transfer Event, IWP as the majority shareholder became entitled to require the claimants to transfer their B shares to the other members at a price determined in accordance with the Articles; (3) that IWP gave valid notice for that purpose by a letter dated 18 February 2021 to MWGL; and (4) that the price for the B shares is to be determined by reference to their “Fair Value” as defined by the Articles—whether the price be the Fair Value itself or only a proportion of it. The issue before me concerns the construction of the provisions that determine the processes by which the shares are to be valued.
The Articles of Association
Article 7 of the Articles is headed “Compulsory Transfers”. The relevant provisions of Article 7.1 are as follows:
“[I]n this article 7 each of the following shall be a Transfer Event in relation to a Member holding B shares:
7.1.1 in the case of an individual Member:
…
(i) that Member, being an employee or director of, or a consultant to, a Group Company, ceasing to be such an employee, director or consultant … where the Member does not remain or immediately become an employee or director of, or a consultant to, another Group Company …”
and in any such case … a Member Majority [that is, a majority shareholder] notifying the Company within 5 years of the occurrence of such event … that such event is a Transfer Event in relation to that Member for the purposes of this article 7.”
Article 7.2 provides:
“Upon a Member Majority notifying the Company that an event is a Transfer Event in respect of a Member in accordance with article 7.1, the Relevant Member and any other person holding Compulsory Transfer Shares shall be deemed to have served a Transfer Notice (a Compulsory Transfer Notice) in respect of all the Compulsory Transfer Shares held from time to time by each of them respectively. …”
The dismissal of the claimants from their employment with MWML was a “Transfer Event” under Article 7.1.1(i). IWP's letter of 18 February 2021 was valid notice under Article 7.2 and entitles it to require the transfer of the claimants' B shares in MWGL (“Compulsory Transfer Shares”).
Articles 7.3 and 7.4 provide as follows:
“7.3 The Compulsory Transfer Shares shall be offered for sale in accordance with the provisions of article 5.3 as if the Compulsory Transfer Shares were Sale Shares except that where the relevant Transfer Event falls within the provisions of article 7.1.1(i), the Transfer Price in respect of the Compulsory Transfer Shares shall be.
7.3.1 Where the Relevant Member is a Bad Leaver, the Bad Leaver Price; or
7.3.2 where the Relevant Member is a Good Leaver, their Fair Value.
7 4 Any dispute as to whether the provisions of article 8.3.1 [scil. 7.3. 1] or 7.3.2 apply in relation to any Compulsory Transfer Notice shall not affect the validity of a Compulsory Transfer Notice nor shall it delay the procedure to be followed under article 5.3 in respect of such notice.”
IWP's letter of 18 February 2021 asserted that the claimants qualified as “Bad Leavers”, on account of misconduct, and that their shares should be valued according to the provisions regarding Bad Leaver Price (which is 25% of Fair Value). Consideration of the question whether the claimants are Bad Leavers has been stayed for the time being; the claimants contend that it cannot sensibly be addressed until the conclusion of the proceedings in the Employment Tribunal.
The reference in Articles 7.3 and 7.4 to “article 5.3” is an obvious mistake, which arose because of a failure to carry through consistently the renumbering of earlier drafts of the Articles. The relevant provisions are in Article 6.1.3 and Article 6.2.
“6.1.3 Where a Transfer Notice is one which is deemed to have been given by virtue of any provision of these Articles (including a Compulsory Transfer Notice deemed to have been served in accordance with article 7.2):
(a) it shall relate to all the Shares registered in the name of the Seller;
(b) it shall not contain a Total Transfer Condition,
(c) subject to article 7.3, the Transfer Price shall be such price as may be agreed between the Seller and the Directors, with the consent of a Member Majority, within 10 Business Days of the date of service (or deemed service) of the Transfer Notice or if either no price is agreed within such period or a Member Majority directs at any time during that period, the Fair Value determined in accordance with article 6.2.2,
(d) it shall be irrevocable; and
(e) subject to articles 4.5 and 7.6, the Seller may retain any Sale Shares for which Buyers (as defined in article 6.5.2) are not found provided that the Seller shall not at any time thereafter be permitted to transfer all or any of such retained Sale Shares pursuant to article 5.”
“6.2.1 The Sale Shares will be offered for sale in accordance with this article 5.3 [sic] at the following price (the Transfer Price):
(a) subject to the consent of a Member Majority, the Proposed Price; or
(b) such other price as may be agreed between the Seller and the Directors, with the consent of a Member Majority, within 10 Business Days of the date of service (or deemed service) of the Transfer Notice; or
(c) if no price is agreed pursuant to article (b) within the period specified in that article, or if a Member Majority directs at any time during that period, whichever is the lower of (i) the Proposed Price and (ii) the Fair Value.
6.2.2 If the Seller and the Directors are unable to agree on the Transfer Price in accordance with article 6.2.1(b) a Member Majority directs in accordance with article 6.2.1(c) (or article 6.1 3(c) in the case of a Transfer Notice which is deemed to have been given by virtue of any provision of these Articles), the Directors shall instruct the Expert to determine and certify the Fair Value of the Sale Shares.
6.2.3 Where in the case of a Transfer...
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