Tradegro (UK) Ltd (1st Respondent) Wigmore Street Investments Ltd and Another (2nd Respondent) Olswang Llp (Intervening) Charles Price (Appellant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Laws,Lady Justice Arden |
| Judgment Date | 16 March 2011 |
| Neutral Citation | [2011] EWCA Civ 268 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2010/1771 |
| Date | 16 March 2011 |
[2011] EWCA Civ 268
Mr Justice Peter Smith
Before: Master of the Rolls
Lord Justice Laws
Lady Justice Arden
Case No: A3/2010/1771
Case No 18230 of 2009
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Matthew Collings QC (instructed by Seddons) for the Appellant
John McGhee QC and Richard Fowler (instructed by Eversheds LLP) for the 1 st Respondent
Neither the 2 nd or 3 rd Respondents were represented or took part in the appeal
Hearing date: 7 March 2011
The Master of the Rolls:
This is an appeal from a decision of Peter Smith J, which concerns the interpretation of the agreed terms on which a sum of money was paid to a firm of solicitors, and ultimately involves deciding who is entitled to the money in the light of those terms.
The factual background
The basic facts, which I largely take from the Judge's summary at [2010] EWHC 1693 (Ch), paras 4–10, are as follows.
By a share purchase agreement ("the Agreement"), Wigmore Street Investments Ltd ("WSI"), then called Real Estate Property Corporation Ltd, acquired from Tradegro (UK) Limited ("Tradegro") the majority shareholding in a company. Two terms of the Agreement are centrally relevant for present purposes, namely, a provision whereby Tradegro provided WSI with a tax indemnity, and a provision whereby WSI agreed to pay Tradegro certain "Additional Consideration". Under the terms of the Agreement, the final variable to enable the calculation of the Additional Consideration was to be assessed by an expert if the parties could not agree it.
In 2008, there were three different sets of proceedings between WSI and its associates on the one hand, and Tradegro and its associates on the other; the most relevant for present purposes, was a claim brought by WSI against Tradegro in respect of the tax indemnity. After a trial in respect of that claim, Tradegro was found liable to WSI on 15th October 2008 in the sum of £647,098.31 (inclusive of a payment on account of costs). When judgment was delivered, it was envisaged that that judgment and the judgments in the two other actions would be netted off. However, Tradegro's solicitors, Eversheds, wrote on 3 November 2008 to WSI's solicitors, Olswang, stating that "each order must be strictly complied with". That was reluctantly accepted by Olswang in a letter written a week later.
On 12 November 2008 Eversheds threatened to seek a freezing injunction in respect of the £647,098.31 ("the Sum") as soon as it had been paid to WSI owing to an alleged risk of dissipation. Tradegro was concerned about this risk because, of course, the Additional Consideration due from WSI had not been determined, and Tradegro anticipated that it would exceed the Sum.
Olswang wrote on 14 November 2008 denying that WSI had any intention of dissipating the sum if it was paid by Tradegro, but stating "it has no objection to that [S]um being paid into [Olswang's] client account on the basis of an undertaking (the precise terms of which we will need to agree) to hold the monies to your order pending the determination of the amount of the Additional Consideration due to your client." This proposal was stated to be conditional on Tradegro not applying for a freezing injunction.
Eversheds replied on 14 November 2008 accepting the proposal. Olswang prepared a form of undertaking, which reflected what was ultimately agreed, and they set it out in a letter of 17th November 2008 to Eversheds, who accepted its terms in a letter sent on 19 November 2008.
The undertaking ("the Undertaking") was then set out in a letter from Olswang dated 19 November 2008. It provides as follows (with numbering added for convenience):
"Undertaking to hold received funds
(i) Upon receipt in cleared funds of £647,098.31 from Eversheds LLP on behalf of Tradegro ("the Monies"), we undertake that we will:
(a) hold the Monies upon deposit in this firm's client account with Lloyds TSB Bank Plc; and
(b) not take any steps to transfer or otherwise deal with the Monies (save for the purposes of the ordinary operation of our client account);
(ii)Without the consent in writing of Tradegro, or order of the court, until the satisfaction in full of any Additional Consideration determined to be payable by WSI to Tradegro under the terms of the [Agreement] (or other agreement between the parties regarding that Additional Consideration)
(iii) provided always that this undertaking will be immediately discharged by the payment of the Sum to Tradegro, whether in full or partial settlement of the Additional Consideration, and whether following a final determination of that Additional Consideration or on an interim basis."
Upon receipt of the letter of 19 November 2008, and the Undertaking included therein, Tradegro paid the Sum to Olswang who placed it in their client account, where it remained until Peter Smith J ordered that it be paid into court.
WSI went in to administration pursuant to an order made on 17th September 2009. Mr Charles Price then took over the dispute in relation to the Sum on behalf of WSI, because he claims to be a substantial creditor of that company. He has been added as a party to these proceedings, and neither WSI nor its administrators have appeared or been represented. Accordingly, I shall treat the submissions made on his behalf as made on behalf of WSI.
On 13 October 2009 an expert appointed under the provisions of the Agreement determined a figure, which the parties had been unable to agree, in the formula for calculating the Additional Consideration. Initially WSI did not accept that the Additional Consideration itself was at that point determined in accordance with the Agreement. That stance was maintained, until the instant proceedings came before Peter Smith J, when Mr Collings, after some indications from the Judge, realistically accepted on behalf of WSI that the Additional Consideration had been determined by reason of the determination of the expert.
Accordingly, as the Judge said, the Additional Consideration was £2,417,820 and became due from WSI to Tradegro on 20th October 2009.
It is clear that WSI is heavily insolvent, and will never pay be in a position to pay the Additional Consideration.
The issue to be determined
Peter Smith J, no doubt on the basis of the arguments before him, and indeed as was reflected in the skeleton arguments before us, devoted some consideration to questions such as whether the Undertaking gave rise to purely contractual rights, whether it constituted a trust, whether Olswang were stakeholders, and whether the Undertaking was a solicitor's undertaking in the technical sense.
As Mr McGhee submitted, and as Mr Collings ultimately accepted, such questions are, subject to one point, ultimately academic. The real question is what the Undertaking means, and, in particular, whether, in the events which have happened, the Sum is to be paid over to the administrators of WSI or to Tradegro. The Undertaking is an arrangement negotiated for a commercial purpose, and therefore must be interpreted according to well established principles, namely by considering the words of the Undertaking, in the context of the factual matrix and taking into account commercial common sense. Because the Undertaking is in correspondence, the parties are agreed that the contents of the correspondence can be referred to as part of the matrix of facts, i.e. the surrounding circumstances.
As I see it, this exercise may result in the Undertaking being interpreted in such a way as to give rise to a trust, a stakeholder arrangement, a solicitor's undertaking, or a personal contract (and not all of these are by any means mutually exclusive), but that is merely a result of the interpretation exercise.
Mr Collings made much of the contention that the court should lean against an interpretation which imposes a particular burden on Olswang, but it seems to me that there is nothing in that. If Olswang, whether stakeholder, trustee or undertaking solicitor, was faced with competing claims for the Sum, it would be fully entitled, indeed, in case of doubt, well advised, to apply to the court for directions.
As Arden LJ pointed out, the only circumstance in which the status of the Undertaking might be significant would be if it created a charge in favour of Tradegro over the Sum as against WSI. In such an event, the charge would appear to be invalid on the ground...
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