Sally Elizabeth Johnson v Howard Duncan Spooner
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli |
| Judgment Date | 11 January 2023 |
| Neutral Citation | [2023] EWHC 8 (Ch) |
| Docket Number | Case No: CH-2022-000083 |
| Court | Chancery Division |
[2023] EWHC 8 (Ch)
Mr Justice Zacaroli
Case No: CH-2022-000083
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY APPEALS (ChD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Jeffrey Chapman KC (instructed by Keystone Law) for the Appellant
Ms Tina Kyriakides (instructed by Greenwoods Legal LLP) for the Respondent
Hearing date: 9 December 2022
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.
This is an appeal, brought with the permission of Meade J, against an order of Insolvency and Companies Court Judge Prentis dated 31 March 2022 (the “Order”).
The following is a brief summary of the facts, a longer description of which is set out in the Judge's written judgment of the same date.
In early 2019 the claimant (“Mrs Johnson”), her husband (“Mr Johnson”) and the first defendant, Mr Howard Spooner (“Mr Spooner”) were in negotiations for the Johnsons to acquire an interest in a business operating the “George Hotel”. The second defendant (“QSL”) had earlier been incorporated by Mr Spooner for the purpose of acquiring a lease on the hotel.
The negotiations resulted in an agreement whereby Mrs Johnson acquired one share in QSL, in return for an investment of £150,000. She and Mr Spooner then each held one share. A written shareholders agreement was entered into on 2 April 2019. The terms included that, for so long as they each held shares in the Company: (1) Mr Spooner was entitled to be a director; (2) Mrs Johnson was entitled to appoint a director; and (3) each of them was obliged to make available to the Company certain items of furniture, paintings, and other decorative items, free of charge.
The relationship between the parties was not an easy one, and had broken down by the summer of 2020. Negotiations ensued for a settlement of disputes between them.
On 29 June 2020 Mr and Mrs Johnson sent an email to Mr Spooner, headed “Without Prejudice and Subject to Contract”, setting out heads of terms for a proposed settlement. These included that payments totalling £132,001 would be made to the Johnsons, as follows: (1) £31,000, being half of the costs of two statutory demands that had been served, but later withdrawn, by Mr Spooner; (2) £18,000, representing the Directors Loan made by Mr Johnson to QSL; (3) £85,001, in respect of an amount claimed to be in excess of £155,000 invested by the Johnsons in QSL. The email stated “All payments to be personally guaranteed by Howard Spooner”, and the payment was described as “Total buyout of our position: 132,001 subject to contract and personally guaranteed.”
Mr Spooner and Mrs Johnson met on 2 July 2020. Mr Spooner contends, and the judge concluded, that they reached, at this meeting, a binding oral agreement on terms including that Mrs Johnson would transfer her share in QSL to Mr Spooner, and £133,084 would be paid to Mrs Johnson, personally guaranteed by Mr Spooner. In his Defence and Counterclaim, Mr Spooner pleaded that this sum was made up of: (1) £42,000, to be paid by Mr Spooner by 7 August 2020, in respect of legal costs of the statutory demand proceedings; (2) £18,000, to be paid by QSL by 30 September, in respect of Mr Johnson's director's loan account; (3) £73,084, to be paid by the Company by instalments on dates up to and including 30 September 2021.
Mr Spooner also pleaded that it was a term of the alleged agreement that Mrs Johnson would cease to have any interest in, or involvement in QSL from that point onwards, that she would be entitled immediately to remove her personal items from the hotel, and that she would transfer her share in QSL to Mr Spooner.
As to the transfer of the share, his contention was that, either as a matter of construction of the agreement or by way of implied term, Mrs Johnson was required to transfer her share to him as soon as possible after 2 July 2020.
In her defence to counterclaim, Mrs Johnson denied that any negotiations took place, or that any agreement was reached on 2 July 2020.
The following day, Mrs Johnson removed a large amount of her personal items from the hotel. Further email communications between the parties followed. On 5 July 2020 Mr Spooner sent an email to Mrs Johnson, headed “Heads of agreement for settlement without prejudice and subject to contract”, saying: Dear Sally, I am pleased that we managed to shake hands and move on.” The terms set out in the email differed in some respects, however, from those which had been agreed at the meeting.
Mrs Johnson replied by email dated 7 July 2020, proposing two alternative ways to achieve a buyout: first, that she would accept £145,000 with £18,000 on signing, £42,000 in accordance with the court order, then the remainder by 16 monthly instalments; second, that she would accept a payment of £100,000 by 6 August, with the £42,000 following as ordered by the court (in fact, the next day).
Mr Spooner responded (at 14:58 on 7 July), having noted that “my offer, which you agreed to, was extremely fair”, by offering the following “to get this done”:
“You will transfer the shares on signing so I can borrow more money. I cannot get my hands in [sic] any more up front money, so the payment schedule remains. I will increase your price to £135,000 which is higher than we agreed, subject to getting the vat invoices for everything and copy invoices for labour and receipts for ferries.”
Further email exchanges occurred on 8 July 2020, in which Mrs Johnson and Mr Spooner disagreed over whether there was already a binding agreement (Mrs Johnson noting, at 12:06, for example that “for the record, I have NOT agreed to any deal”).
At 12:45, Mr Spooner emailed Mrs Johnson, saying: “Look at my offer in red please. Your money is secured by the personal guarantee that's why the shares are handed over on signing”.
At 14:08, Mrs Johnson replied:
“Howard, I accept your offer of 135,000 subject to contract, and conditional on your personal guarantee. Shares up front on signing. Payment as per the suggested schedule over 16 months. So 42,000 August 7th as per court order, 18,000 30th September 2020, then the rest over the next 16 months on a monthly basis according to your schedule already suggested. All personal item, already listed to be returned first week jan 2021. can you please draft up the contract and send it to me. I've stuck to my side of this, please be honourable and stick to yours. Let's all move on. This has to be the end of the matter.”
At 18:05, Mr Spooner responded: “Thanks Sally, I will get a draft across to you.”
No written agreement, as envisaged in the above emails, was in fact executed. Mr Spooner nevertheless contended that a binding agreement had been reached, in reliance on which he filed the necessary forms at Companies House to transfer Mrs Johnson's share to him. His pleaded case is that, as a result of the variation agreed on 8 July 2020, Mrs Johnson was required to transfer the share as soon as possible, alternatively in a reasonable time. In her defence to counterclaim, Mrs Johnson accepted that she agreed to Mr Spooner's revised offer on 8 July 2020, but contends that no binding agreement was reached because her acceptance was subject to contract.
These proceedings are, in form, a claim by Mrs Johnson for the rectification of the register to reflect her continuing ownership of one share in QSL. Mrs Johnson was, however, granted such relief by ICCJ Jones on 12 August 2021, but the registration of her as the owner of a share in QSL was marked “disputed” pending resolution of Mr Spooner's counterclaim that she had agreed to transfer her share to him. In substance, therefore, the trial before ICCJ Prentis was of Mr Spooner's counterclaim.
The Judge found that the negotiations between the parties reached a conclusive agreement for the sale of Mrs Johnson's share to Mr Spooner on 2 July 2020, varied subsequently by the exchange of emails on 7 and 8 July 2020. Alternatively, if the agreement was not made on 2 July 2020 it was made on 8 July 2020 (see §202 of the judgment).
Importantly, he preferred Mr Spooner's evidence given at the trial, over that of Mrs Johnson, as to what was agreed between them on 2 July 2020.
He found that, although the email from Mr and Mrs Johnson of 29 June 2020, setting out terms that formed the basis of the discussion on 2 July 2020 was marked “subject to contract”, Mrs Johnson and Mr Spooner intended to create a legally binding agreement there and then on 2 July 2020: “[Mr Spooner] and Mrs Johnson treated this as a conclusive agreement, notwithstanding, as she said, that she wished it to be drawn up formally” (see §135).
He also found that, notwithstanding the reference to “subject to contract” in Mrs Johnson's email of 8 July 2020, accepting Mr Spooner's “offer of £135,000”, that the parties had reached a binding variation agreement in the exchange of emails on 7 and 8 July 2020. He said, at §181:
“…I read this as an immediate acceptance by Mrs Johnson of the terms sent at 1458 on 7 July. She has had enough. She has already replied once, in detail, to this offer making her own counter-proposals. Those are gone. There has been a change of heart. Agreement is effective immediately, with the terms to be written up, as before, as the record of what has been agreed.”
There is no appeal against these findings: although permission to appeal was sought on the ground that the variation agreement reached on 8 July 2020 was “subject to contract”, that was refused.
The only reference in the judgment in response to the timing of the...
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